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This report will study Invigorate Footwear, an American based foot ware company. The objective of this report is to evaluate the current strategies and finding the key problems facing by the company and further strategic recommendation will be provided as the key for the company to continue competitive advantage.
By using different types of environmental tools such as Porters five force analysis, PEST analysis, SWOT and Stakeholder analysis, we can identify the problems facing by the firm.
Five Forces analysis shows the high intensity of industry competition. PEST analysis shows the result that external factors affect Invigorate Footwear in several ways. On the other hand, SWOT analysis is compiled for internal environment analysis. The strategic reviews of key players of invigorate will be identified by stakeholder analysis.
With the help of above mentioned tools we can identified key issues which need to be addressed by Invigorate Footwear for a better future.
The key issues being; corporate social responsibilities such as outsourced manufacturing, business ethics like violating health and safety measures in the partner company, leadership problems such as traditional hierarchical structure in decision making, environmental issues like leather tanning processes, lack of implementing new technology in the leather manufacturing process due to employee resistance and the competitors are getting advantage over the Invigorate by importing tanned leather and outsourcing the manufacturing process to the cost efficient countries like India and China.
The above issues of Invigorate are addressed and the appropriate recommendations are suggested with the help of academic references.
The purpose of this paper is to examine the process of change that can be bought about in Invigorate footwear with the help of suitable leadership.
Invigorate footwear was founded in America in the year 1970 by its current CEO, George Lieber. It developed a reputation of being the employer of choice in the community. Lieber did not want to compromise on quality and thus invested in his own leather tanneries; he also invested heavily in the health and safety of his employees, employee training and development and also paid them a good salary. He expanded his business from tanning to shoe retail stores in important cities in the United States.
However as on date Invigorate footwear is going through a tough phase. This was caused due to numerous internal and external tribulations in the company. As Lieber did not want to compromise on quality and was reliant on traditional processes of tanning; the employees of the company were resistant to change and were an aging workforce, an internal family problem on who would lead Invigorate footwear, lack of proper leadership and a partnership with a company in Vietnam which employed child laborers contributed to the current state of Invigorate footwear.
An analysis of the current and future implications of Invigorate footwear will be carried out in the following paper so as to identify the key issues surrounding the company.
CASE DIAGNOSIS AND ANALYSIS:
The abbreviated SWOT which shown in above fig. has been formulated with the help of macro and micro environmental analysis. The tools used for the diagnosis are PEST analysis (Appendix 1), Porter Five Force model (Appendix 2), SWOT Analysis (Appendix 3) and Stakeholder Analysis (Appendix 4).
Major issues facing by the Invigorate are explained below.
Corporate Social Responsibility & Business Ethics:
Corporate Social Responsibility -
The major problem created in the organization with respect to CSR is outsourcing the tanning process which created job insecurity and which in turn created lack of trust in the local community.
According to Epstein, corporate social responsibility is discernment of expectations, specific issues, problems and claims upon business organizations and their leaders regarding the consequences of organizational policies and behavior on both internal and external stakeholders (Epstein, 2007. Pp 218).
According to CIPD, a successful strategy of corporate social responsibility depends on building relationships with stakeholders and getting buy in across the organization. So it means that reviewing existing policies and practices like, internal communications, recruitment, health and safety, diversity or training.
One of the main conclusions given by the CIPD was, the corporate social responsibility became an instrument of change in an organization's behaviors (CIPD, 2009).
As per the above mentioned academic recommendations made by the authors, it is suggested to keep a healthy relationship with the stakeholders.
Business Ethics -
The ethical violation of health and safety measures by the partner company in Vietnam which created the bad reputation to Invigorate.
Many views have been presented by authors on strategic frameworks for managing ethics. Some of them are explained below,
DeGeorge (1999) compete that people believe businesses are unethical, when in fact they generally embrace the values of ethics in doing business. He cites several factors that serve to legitimize his position; one such factor is society, which expects ethical behavior of its business when it cries out against dishonest labor practices or environmental policies. He compete that good ethics is good business (Joyner et al, 2002. Pp 116).
And the trickier point of view on why businesses follow a more ethical path has its roots in a desire to convince stakeholders that the firm is doing the right thing. The firm's end here is either to
Avoid legal consequences of its actions or
Convince stakeholders that the firm seeks to serve stakeholder interests rather than its own.
The company goes on to say that it is an organization where integrity and honesty are essential to the ways in which it does business and how it interacts with people. It believes that customer satisfaction is the source of employee, shareholder, supplier and community benefits and it will exceed customer expectations through continuous improvement in quality, service, and productivity (Farnham, 2005. Pp 253).
In addition to seeking improvements and innovations in its business, the company has to follow certain things such as,
Promoting the health and safety of its employees
Protecting the environment
Expecting all employees to carry out their work in accordance with the company's business standards of conduct and reporting any violations of the ethics policy to the company
Providing equal opportunity and diversity in all its employment
As per the above implications, any organizations should follow the business ethics to be successful.
Being a traditional hierarchical organization decision making in Invigorate is also one of the major issues.
A key factor in effective strategy implementation is the quality of strategic leadership at the top of the organization. The ability of leaders to communicate organizational goals clearly and guide employees to focus their attention on achieving these goals is crucial to success (Henry, 2008. Pp 338).
Beer and Nohria argues that all strategic changes in leadership can be compared in several key dimensions they are goals leadership, focus, process, reward system and the use of consultants (Beer and Nohria, 2000).
Goals - Confront the tension between theory E and theory O
Leadership - Set the direction from the top and engages people below
Focus - Address the hard and soft sides of the organization at the same time
Process - Plan for spontaneity
Reward system - Incentives should reinforce change
Use of consultants - As expert resources who empower employees
Some of the factors which influence the effective leadership were communicate the organizational goals to the employees and also reward them for their performance.
In recent years local competitors have not only begun importing tanned leather but have also outsourced manufacturing to countries like India and China due to low labour costs and lower cost of production (Sockalingam, 2011). Successful firms in leather and shoe industries which had either adapted to modern technology or been able to establish special niche markets.
According to porters there are two types of competitive advantages which are combined with the range of activities for which a firm looks for to achieve them, which leads to three generic strategies for achieving above average performance in an industry (Porter, 1985, Pp 11 - 15).
Cost Leadership - firms sets out to become the low cost producer in its industry.
Differentiation - firm seeks to be unique in its industry along some extent that is widely valued by buyers.
Focus - the strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.
According to Collis and Montgomery, the internal potential of the firm is mainly founded on its resources and capabilities upon which strategies are built aiming to produce a competitive advantage. Valuable resources and capabilities can represent physical and intangible assets and capabilities that contribute to improve efficiency, effectiveness, exploit opportunities or neutralize threats in the environment (Collis and Montgomery, 1995).
To overcome the competition there should be cost leadership that means price negotiation with in the industry and differentiation, which has to be unique in the industry.
Environmental Problems: (Related to leather tanning process)
There are multiple processes which are involved in converting hides and skins into finished leather having environmental consequences.
During the operation of tanning and leather finishing, community health and safety impacts which are common to those of most industrial facilities (IFC, 2007).
Environmental issues associated with leather tanning are,
The prevention and control measures of environmental issues associated with leather tanning are described below.
Wastewater - the main prevention of wastewater measures,
Through recycling of process streams, we can reduce the water consumption.
Separation of wastewater streams.
Use of short floats in the tanning cycle, which allows for water savings of upto 70%.
Air emissions - For prevention of air emissions we have to control the tanning facilities include organic solvents from tanning and leather finishing operations; sulfides from the beamhouse and wastewater treatment; ammonia from the tanning and the post tanning operations; dust particulate from various process operations; and odors.
Solid Waste - solid waste includes salt from raw skin/ hide dusting; raw skin/ hide trimmings; hair from the liming; and fleshing from raw skins. The prevention and control measure for solid waste includes
Reduce the inputs of process agents
Recycle sludge as compost (soil conditioner or anaerobic digestions for energy generation).
Lacking in Implementing New technology: (Related to leather tanning process)
Technological dynamism was found to be one of the most crucial factors determining efficiency and export competitiveness. Invigorate that had failed to modernize their industrial processes found themselves unable to increase or maintain their export shares (Sockalingam, 2011).
Technology is most important driving forces that are increasing the need for a strategic perspective and greater involvement throughout the organization (Barkema et al, 2002. Pp 916 - 930). Technological change and diffusions of new technologies are moving at an incredible pace. Such development and flow accelerates the importance of innovation for firms if they are to remain competitive (Dess, et. al., 2005. Pp 22).
According to Blackman's five clean technologies are considered, two associated with dehairing and two associated with chrome tanning (Blackman, 2005).
High exhaustion - using special inputs and procedures to ensure that more of the chrome in the tanning bath actually affixes to the hide and less ends up in waste streams.
Enzymes in the dehairing bath - substituting biodegradable enzymes for lime and sodium sulfide.
Precipitation of chrome - using alkalis to precipitate out the chrome in the tanning bath, then collecting the resultant sludge and processing it with sulfuric acid to recover the chrome.
Recycling the dehairing bath - saving and reusing the contents of the dehairing bath instead of discharging it all into the sewer after a single use.
Recycling the chrome tanning bath - reusing contents of the tanning bath instead of discharging them into the sewer after a single use.
As per the above discussion, Using new technology for tanning process like High exhaustion, Enzymes in the dehairing, Precipitation of chrome, Recycling the dehairing bath, Recycling the chrome tanning bath.
This study has examined the role of corporate social responsibility & ethics, technology development, environmental issues, strategic leadership and the competitive advantages in Invigorate Footwear.
As per the analysis on Invigorate, key recommendations listed as follows
CSR - suggested keeping a healthy relationship with the stakeholders.
Business Ethics - organizations should follow the business ethics to be successful.
Strategic Leadership - there should be a clear line of communication in the organization so as to achieve organizational goals and also reward employees appropriately.
Competitive Strategies - there should be cost leadership that means price negotiation with in the industry and differentiation (which has to be unique in the industry).
Environmental Issues - the control measures of environmental issues associated with leather tanning are recycling the waste water and reduce the amount of chemical usage.
Lack of implementing new technology - Using new technology for tanning process like High exhaustion, Enzymes in the dehairing, Precipitation of chrome, Recycling the dehairing bath, Recycling the chrome tanning bath.
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An analysis of the following four (political, economic, social, technology) components of the macro environment can help to think how Invigorate Footwear should respond to these external influences.
Industrial safety and environmental regulations
The seasonality plays an important role in buying behavior of different shoe kinds
Industries relocate production to low cost production countries such as India and China
Fashion trends are emerging more and more over the world which gives possibility of standardization
Corporate social responsibility increasingly important for consumers (willingness to pay higher if company is social responsible)
Fashion and lifestyle changes
Competing technology development
Research and development budgets high in order to find innovative new styles and technologies
Porter's Five Forces:
The Porter's five force model is a tool of analysis to assess the attractiveness of an industry based on the strengths of five competitive forces (Henry, 2008. Pp 69 - 80).
Potential New Entrants [Low]
Power of Suppliers [Low]
Competitive Rivalry [High]
Power of Buyers
Threat of Substitutes [Low]
Potential New Entrants [Low] -
It is a capital intensive industry. Even though it would not be difficult for a new company to obtain the raw materials and the labor needed to produce shoes, there is almost no chance for them to gain popularity in such a mature industry. Brand loyalty is extremely strong and it would be very hard for a new entrant to steal loyal customers from the already existent players.
Economies of scale play a huge role as well and the bigger players have an advantage of producing the products at a lower price than compared to new entrants. As the output are bigger and fixed costs of factories, machinery, marketing and R&D will be decreased per unit.
Access to resources
Power of Suppliers [Low] -
Suppliers have less power to exert on buyers.
Suppliers cannot switch easily the buyer because the buyers are getting the products in bulk quantity.
Power of Buyers [High] -
The buyer does not compromise the low quality of product from the suppliers as the competition is based on quality.
Emerging markets in generally are very price sensitive. The premium sector will grow with time as the market becomes more sophisticated.
Buyers have authority to easily switch off from one supplier to the other.
Threat of Substitutes [Low] -
Availability of different types of products(other type of shoes)
Changing fashion trends
Competitive Rivalry [High] -
Local competitors who are already in the business and have a cultural advantage in understanding the customer.
Location based competition is another factor in the competition for the brands.
Product differentiation is not stable as the fashion in footwear industry is also changing very rapidly.
Quality of material is the aspect that is most crucial for the brands to satisfy their customers.
A SWOT analysis summarizes the key issues from the business environment and the strategic capability of an organization that are most likely to impact on strategy development (Johnson, et. al., 2005).
Strong presence in the local community
Good design capability
Corporate Social Responsibility (Education funding)
Invested in his own leather tanning factory
Comfortable availability of raw materials and other inputs.
Quality of product style
Strong relationship with employees and community
Traditional process increases the cost of production
Ethical violations by the partner company
Bad reputation in the community due to new ideas.
Corporate Social Responsibility
Not utilizing the current talent
Traditional/ hierarchical structure
Lack of automated equipment manufacturing ability
Adopt to global market
Implementing new technology
Utilize existing workforce or new recruitment due to natural wastage
Opportunity to bargain with local suppliers
Can be a leader in developing environmentally sustainable business
Entry of multinationals in domestic market
Decrease in profits and market share