Products And Markets Fila example essay topic

Athletic Shoe Industry FILA MGMT 320 Robert Roderick March 31, 2003 Fila Company History Two brothers named "Fila" who lived in Bella, a town at the base of the Italian Alps, conceived inspiration for Fila in 1923. The company began as a knitter of fine textile and maker of underwear and continued with this trend for about 50 years. Then in 1974 a new managing director came on board and Fila ventured into athletic apparel with a high concentration in the ski and tennis markets. (Fila Holding S. p. A. Profile, 2000) Today, Fila Holding S. p. A., appears to still be acting as a traditional functional hierarchy, or a pyramid. There has however, been some restructuring activities and even recent replacements of the CEO, COO, and CFO.

(Fila Holding S. p. A. Profile, 2000) Products and Markets Fila is an authentic sports brand that designs and markets a wide range of products for men, women, and children that enhance their pursuit of sports and leisure. These products include athletic footwear, activewear, casual wear, hats, socks, sportswear, and wristbands. Independent subcontractors accomplish the manufacturing of these products mainly in the Far East. The company is also involved in many joint ventures where independent licensees do the design, manufacturing, and distribution. (Yahoo / Market Guide, 2000) These licensed products include sunglasses, watches, underwear, golf clubs, golf bags, and in-line skates.

The company's marketing foundation focused on tennis but today they have branched out into such markets as basketball, field & track, and soccer. In addition to a marketing focus in sports, Fila is the sponsor of many events and television programs, and supplies sport gear to many top athletes. Fila's headquarters are located in Italy but has a separate organization in many of the countries where it operates. This is done to better match the preference and needs of individual markets aimed towards that country's consumer. (Fila Holding S. p. A. Profile, 2000) Currently there are over 40 subsidiaries around the world that are affiliated with Fila. Recent Economic Data In 1999, Fila employed 2,863 employees, which equaled a one-year employee growth of 8.7%.

Currently they employ 3,448 employees worldwide. (Company Research Report, 2000) Fila has been listed on the New York Stock Exchange (ticket FLH) for approximately seven years and had an initial offering of $18. Since then, Fila has had a high of 106.00 in mid to late 1996 and then dropped for the next two years to about 7.00. There was a slight recovery period over the next year and the stock rose to between 14.00 and 15.00. Unfortunately this trend was only temporary. Earlier this year Fila reach their all time low of 6.19.

Currently they are experiencing another recovery period and on July 19, 2000 the market closed with a share value of 11.00. Overall, Fila stock is down 40.54% since it became public. (StockMaster. com, 2000) 1999 sales were $911.1 million with a one-year sales growth of 10.8%. (Fila Holding S. p. A. Profile, 2000) Fila primarily sells and markets its products in Asia, Europe, and North America with the majority of the sales being in Europe. Table A, Sales by Region, and Table B, Sales by Product, are shown in the Appendix and give a more detailed breakdown of how the sales were distributed. Company Purpose The company's mission is stated as follows: " Fila is committed to building a great company by attracting, developing, exciting and retaining outstanding people.

Fila mirrors the values of a winning sports team: desire for success, team spirit, commitment, enthusiasm, creativity, and fun". (Fila Holding S. p. A. Consolidated Financial Statements 1999) 1997 brought losses across the industry and Fila's revenues were down 77%. Therefore, the purpose, or objective, for Fila is quite simple and very clear, "the company break even". (Fila Holding S. p. A. Consolidated Financial Statements 1999) The company plans on achieving this objective by reducing current and past losses and anticipates returning to a profit in 2001. Fila has already begun reducing their losses with the closing of a design center, the selling of one of the U.S. headquarters, and the entire internal sales force was replaced with independent agencies. (Fila Holding S. p. A. Capsule, 2000) Fila has also initiated a re-building activity that is designed to bring the company back to profitability and lay down the foundation for a future of growth.

The restructuring program cuts into both the revenues and fixed costs. Non-profitable sales of products were reduced extensively and gains in efficiencies were achieved without giving up operating effectiveness. Key initiatives that have attributed towards the rebuilding and globalization of Fila in 1999 have been: . Expansion of the apparel business: There was the introduction of the Lifestyle Collection that was inspired by active sports but designed for everyday wear...

Strong growth in some key European Countries and in Asia Pacific: In the UK, Germany, and France the brand grew at a double-digit rate. (Fila Holding S. p. A. Consolidated Financial Statements 1999). Improved quality of sales: Gross margin increased by 5 points... Strong reduction of structural costs: This is attributed to Lean activities and resizing of the company through a restructuring process that brought fixed costs down by 30% in 1999. Reengineering of the supply chain: A new program covering all aspects of the supply chain was implemented. This allows more control on inventories with better distribution to factories.

Outsourcing of warehouses in USA and Hong Kong has occurred with key European countries to follow in 2000. (Fila Holding S. p. A. Consolidated Financial Statements 1999) Along with continuing the 1999 components for growth and globalization, Fila expects the following factors to be driving components for 2000: . New product collections: In footwear, there will be a focus on running and cross training. In apparel, Fila expects high growth in the woman and lifestyles categories... Marketing support to the new brand positioning: There will be a new ad campaign that will associate Fila to a sport that is simple, yet rich in human values, and able to bring people together...

Back to growth in USA and Italy sales: In the USA, Fila is introducing new products, communication, marketing, and new relations with trade in order to regain the credibility they once had. In Italy they are using the aggressiveness of the new management to make the Italian aware of their home brand. Knowing all this, Fila recognizes the need to change the way that they do business in order to be competitive in the global market. To accomplish this, there needs to be a company vision to complement Fila's mission and objective. "That without vision the people will perish. A clean vision is vital to the continued success as unexpected product, smart management, and creative marketing.

We " ve achieved our goal in becoming the third largest athletic footwear and apparel company worldwide. Now new goals have been set. To continue a strong sales urge. To increase investments in research, product development, and marketing support. To change the game in more markets with more impact than ever before". (About Fila, 2000) Challenges Like many firms, Fila, has been exposed to different challenges.

There are problems that cannot be solved, measuring intangibles, valuing diversity, and addressing new issues for which managers and organizations are not well prepared for. Fila has faced a difficult year that has had a decrease in the consumption of athletic products accompanied by an increase in competition. Fila targets age 12 to 24, however this group is spending an increasing proportion of their funds towards technology such as the Internet, telecommunications, and video games. (Fila Holding S. p. A. Consolidated Financial Statements 1999) Knowledge is a key factor in a company and it becomes necessary in order to operate and be competitive in a global market. Over time it became apparent that Fila's senior management's knowledge base was not developing. This resulted in the company loosing their profit margin in the industry.

The challenge then became to find a replacement management team that was solid, competent, and visionary enough to develop and implement new and creative changes. Management is faced everyday with new challenges that they have not had to face in the past. A current challenge is the introduction of sales on the Internet. More and more today, people are turning to the Internet for purchases. As a result, Fila launched its web site, this past spring. Initial reactions have been good but it may be at the cost of jeopardizing relationships built between retailers and distributors, because on-line sales are now in direct competition.

(Messmer, 1999) Cultural Environment Past advertising campaigns have focused at the national level, however with changes in the world, Fila has reintroduced its brand globally with a new marketing approach that crosses cultural boundaries. Fila's campaign aspires to distinguish themselves from its rivals, who focus on competitiveness and victory. Fila, on the other hand, is using the "Sport Life Fila" slogan that shows that athletes have a life and a human side, outside of their sport. The advertisements will show famous athletes in action. The human side of these athletes will show Grant Hill of the Detroit Pistons playing the piano, Carla Over beck, US women's soccer team captain, mothering her young son, and Sammy Sosa of the Chicago Cubs, hitting a homerun to his homeland of the Dominican Republic. (Fila Adds Human Touch, 2000) In addition to a globally cultural marketing campaign, Fila is in the pursuit of giving opportunities and advantages to athletes all around the world.

Fila has launched Discovery USA and Discovery Italia structured after the highly successful Discovery Kenya. The term discovery is used because it is felt to represent Fila's approach to sports. "Which in fact it experiences as pure emotion, envisions as an ideal path for individual development and achievement both in the competitive arena and on a personal level". (Fila Launched Discovery USA, and Italia, 2000) The aim of these programs is to identify promising young individuals who are not yet aware of their own talents and / or may lack the opportunities that others may have. Fila then give them the intense training needed to become world-class athletic competitors at both a physical and psychological level. This is being accomplished in areas where Fila senses that there needs to be a new drive in sports.

The training has also given Fila's coaches further insight on how training should be individualized for each athlete. A global look at the athlete needs to be taken into consideration with emphasis not only on the athlete and their body, but also their personality and cultural environment. Economical Environment Fila does not produce the products that they design and market. Instead, they outsource the manufacturing to other countries that are more capable and suitable for this process. Korea has been one such supplier of Fila products and fabric. Fila wants to continue importing from Korea for a couple reasons: .

Korea produces excellent quality. Fila has confidence in the capabilities of the Korean management team. The continued manufacturing will help enhance the Korean economy during tough times In support of this, Fila has invested 22 billion won for the construction of a distribution center and will re-invest all profits from the Korean operation back into that process. (Fila to Boost Import, 1998) The Industry Over the past years, the entire athletic shoe industry has experienced a decline due to the Asian crisis in 1997. Despite this, this industry is highly competitive and one where no prisoners are taken. This is especially true among the leaders such as Nike, Reebok, and adidas.

Along with being highly competitive, the athletic shoe industry is a demanding market where extreme competition, price conscience consumers, combined with ever-changing market trends and fads have all been attributing factors in how a manufacturer responds. For these reasons, manufactures must be quick to react to new market demands. Therefore the opinions of buyers and strong relationships with those same buyers are very important in the evaluation of future growth in the athletic shoe industry. They are the ones who look at the marketplace as a whole by evaluating the trends and fads, taking note of problems that manufactures experience, recognizing the amount of markdowns and returns that occur, and the levels of inventories left on the shelf to determine a future outlook of what they should be purchasing. In May 1999, the marketplace showed that the average retail price for a pair of athletic shoes $61.70. This increase from the previous month was credited to a decrease in the number of markdowns.

The previous month showed an average retail cost of $55.00, which was attributed to an increase in the promotional activity. (Boswell Report, 1999) Buyers were disappointed that there were not any new trends and technologies for Fall 1999. This is key time for manufacturers with the back-to-school season, and consumers were not given any motivation to go out and buy. Early in 1999, the casual and athletic sportswear look became the trend. Not only did the companies in the athletic shoe industry place an increased concentration on their lines of apparel, but several other companies in the clothing industry did so as well. Everyone has orientated lines towards a lifestyles type collection and competition is very high.

The footwear market has suffered a decrease for the second year in a row. Sales in the U.S. for 1999 were down 1%. This is after a 6% decrease in 1998. Europe has also experienced similar difficulties. In 1999, Germany was down 8% and France 3%, while Italy and the UK remained unchanged. (Fila Holding S. p. A. Consolidated Financial Statements 1999) Fila's main competition is from Nike, Reebok, and adidas who rank #1, #2, and #3 consecutively in almost all categories.

These include: . Top Sports Shoe Makers for 1997 and 1998 (Fila ranks #3 for 1997 and does not show for 1998) (Market Share Reporter, 1999). Top Sports Shoe Makers in Indonesia (Fila ranks #4) (World Market Share Reporter, 1999). Top Sports Shoes for Juniors (Fila ranks #5), Men and Women for 1998 (Market Share Reporter, 2000). The Global Sports Shoe Market for 1997 (World Market Share Reporter, 1999) Table C in the Appendix shows a sales breakout by company... The Sports Shoe Market for UK, Germany, Japan, and Israel (Fila ranks #4 in Israel only) (World Market Share Reporter, 1999) These reports are derived from 1997 and 1998 data and as mentioned before rank Nike, Reebok, and adidas #1, #2, and #3 consecutively.

However, information from buyers in 1999 rank the top four companies as follows: 1. Nike 2. adidas 3. K-Swiss 4. Reebok Appendix Table A 1999 Sales By Region (Fila Holding S. p. A. Profile, 2000) $ Million % Of Total Europe Italy 102.6 11 Other 370.0 41 US 195.2 21 Far East 159.7 18 Other Regions 83.6 9 Total 911.1 100 Table B 1999 Sales By Product (Fila Holding S. p. A. Profile, 2000) $ Million % Of Total Apparel 453.0 50 Footwear 433.6 47 Royalties 17.7 2 Other 6.8 1 Total 911.1 100 Table C Global Sports Shoe Market -1997 (World Market Share Reporter, 1999) Company Percentage Nike 35.5 Reebok 13.5 Adidas 9.3 Fila 5.7 Asics 3.2 New Balance 3.0 Converse 2.7 Puma 2.4 Others 24.7

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