Me - Monitor Deloitte Case Study Example Footloose
Me - Monitor Deloitte Case Study Example Footloose
Me - Monitor Deloitte Case Study Example Footloose
example
“Footloose”
Footloose
Introduction
Duraflex is a German footwear company with annual men’s footwear sales of approximately 1.0 billion
Euro(€).
They have always relied on the boot market for the majority of their volume and in this market they
compete with three other major competitors.
Together, these four brands represent approximately 72% of the 5.0 billion € German men’s boot
market. The boots category includes four main sub-categories:
Work boots, casual boots, field and hunting boots, and winter boots. Work boots is the largest sub-
category and is geared to blue collar workers1 who purchase these boots primarily for on-the-job
purposes. Casual boots is the fastest growing sub- category, and is geared more towards white collar
workers2 and students who purchase these boots for week-end / casual wear and light work purposes.
The four key competitors in the market are Badger, Duraflex, Steeler, and Trekker.
1
Blue collar workers: wage earners who generally work in manual or industrial labour and often require special work clothes or protective clothing, which are
replaced approximately every 6 months
2
White collar workers: salaried employees who perform knowledge work, such as those in professional, managerial or administrative positions
Badger and Steeler are both well established as Market Share of Work and Casual
work boot companies, having a long history and Boots by Company (2013)
strong brand recognition and credibility among blue
collar workers. At the other extreme is Trekker, a
43%
strong player in the casual boot market but a very
weak player in work boots. Duraflex, however, is a Badger 11%
cross between the other competitors, having a
16%
significant share in both work boots and casual 40%
Duraflex
boots.
19%
Historically Duraflex had an even stronger position in Steeler 4%
the work boot sector. However, since 1996 when the
5%
company began selling casual shoes and focusing
Trekker 34%
on the growth opportunity in casual boots, sales of
the Duraflex work boot line have steadily declined. 17% Work boots
Also, around the same time Duraflex shifted its Other 11% Casual boots
emphasis, Badger became a much more assertive
competitor in the work boot market, increasing its 0% 10% 20% 30% 40% 50%
market share to 43% in just three years. Market Share
In the fall of 2013, Badger launched a new line of aggressively priced work boots. The strong success
of this line has caused Duraflex’s management to re-evaluate their position in work boots. With limited
additional resources, management must now decide if they should focus their efforts on competing
with Badger in the work boot sector, or focus their resources on further strengthening their position
with casual boots.
In January of 2014 Duraflex hired a leading consulting firm to conduct research to help management
in its decision making. To make an informed recommendation, the consultants realized they needed
to collect information that would enable them to size the market and better understand Duraflex’s
competitive position.
To begin with, the consultants developed a 20 minute quantitative telephone survey that was
conducted among 500 randomly dialed consumers across the country’s 6 primary regions. In addition,
the consultants completed some internal cost and pricing analysis for Duraflex’s work and casual boot
lines. The market pricing analysis showed Duraflex competing at the premium end of the market for
both its casual and work boot lines.
60%
60% 55%
50%
40% 35%
30%
25%
20%
20%
15%
10%
0%
100%
16%
21% 21% Other
26%
Other Other
Other
80% 14%
6% Apparel Store
13% Athletic Store
Dept. Store 11%
Sporting Goods 16%
Dept. Store
60% 15% 35% 13%
Discount / Outlet
Channel Shoe Store Discount / Outlet
Share (%)
54%
20% Shoe Store
39%
28% Safety / Work 28%
Shoe Store Shoe Store
0%
Duraflex Badger Steeler Trekker
0% 20% 40% 60% 0% 20% 40% 60% 0% 20% 40% 60% 0% 20% 40% 60%
Share (%) Share (%) Share Share (%)
(%)
2 Case study example | “Footloose” © Deloitte & Touche (M.E.)
Exhibit four
180
170 euros
160
22%
Company Margin 140 euros
140
16%
120 euros 8% Company Margin
120 15% Retailer Margin
Company Margin 10% Retailer Margin 6%
12% General & Admin. 11%
Market 100 Retailer Margin 13% General & Admin.
price (DM) Design 10%
80 General & Admin. 10% Design
9% Sales & Mktg. 6%
21% Sales & Mktg.
60 Design 19%
17% Labour
15% Labour
40 Sales & Mktg.
12% 32%
Labour 21% Materials
20
15% Materials
Materials
0
Duraflex - Casual Duraflex - Work Badger
Work through these questions on your own, using the text and exhibits in the preceding slides. An
answer key is provided in the slides that follow…
1. How big is the work boot market (expressed in euros)? Does Duraflex get more of its
revenue from work boots or casual boots?
3. What changes would you recommend to Duraflex’s work boot strategy? Why? Would
you recommend they introduce a sub- branded boot line?
1. How big is the work boot market (expressed in euros)? Does Duraflex get more of its
revenue from work boots or casual boots?
To find the size of the market, we can use the following equation:
(Average Boots Price) * (% of male population that bought work boots in past year)
* (total population for the segment) * (number of pairs bought in a year)
Exhibit One gives us the populations for each segment and the percentages that bought boots. We
therefore need to find the number of boots sold and the average price of each pair. For this question, the
candidate will need to make some assumptions.
1. Average number of boots purchased per user
• For work boots, we know that blue collar workers purchase an average of 2 pairs per year
(from Introduction, Footnote1)
• White collar workers and students who buy work boots probably use less rigorously and less frequently,
therefore probably only 1 pair per year
• For casual boots, we can make a reasonable assumption, knowing that casual boots are purchased
primarily for weekends and light wear (from text) so the average number of pairs should be no more than
work boots from Exhibit 1 (i.e. 1 pair per year)
2. Average price per pair of boots
• Work boots cost more (compare Blue Collar vs. Student) so the average price should be higher than 140
€ for all (150 € is reasonable); casual should be lower than student (100-110 € is reasonable).
2 Case study example | “Footloose” © Deloitte & Touche (M.E.)
1. How big is the work boot market (expressed in euros)? Does Duraflex get more of its
revenue from work boots or casual boots?
The total market value will then be the sum, for each segment, of the following equation:
(Average Boots Price) * (% of male population that bought work boots in past year)
* (total population for the segment) * (number of pairs bought in a year)
(Average Boots Price) * (% of male population that bought work boots in past year)
* (total population for the segment) * (number of pairs bought in a year)
Or:
Summary:
We know from the table on slide 2 that Duraflex has a 16% share of the work boot market and 40% of
the casual boot market, therefore:
– Duraflex’s revenue from the work boot market = 16% * 2,588 MM = 414 MM
– Duraflex’s revenue from the casual boot market = 40% * 1,025 MM = 400 MM
So Duraflex gets most of its revenue from work boots, even though the revenues are almost evenly split
Our Answer:
The size of the work boot market is ~€2.6 billion. The casual boot market is ~€1.0 billion large.
Duraflex generates €414 million from work boots and €410 million from casual boots.
Depending on the assumptions taken, work may be slightly larger but the two should be
relatively close.
Answer Q2
Distribution
Pricing
Cost analysis
Even if you have many good ideas to answer this question, you won’t be impressive
without STRUCTURE. You don’t need a formal framework, just be methodical and
organised in your approach – and summarise at the end!
Summary
• Duraflex is not sold where work boots are being purchased
• Duraflex is not meeting the key needs of blue collar workers, as it is weaker than
competitors on the critical ‘Comfort’ dimension
• Badger prices its boots more competitively, which is likely to be particularly appealing
to the large work boot market; this has helped develop a large and loyal consumer
base
• Badger has lower retailer margins (both absolute and relative) and spends less
on Sales & Marketing
Answer Q3
3. What changes would you recommend to Duraflex’s work boot strategy? Why? Would
you recommend they introduce a sub-branded boot line?
The important thing with a subjective question is not what you answer to the question, but how you
answer the question – pick a point of view and support it with critical reasoning!
Given that Badger is introducing a new work line, There may be unique / niche positionings for
they may see new growth potential in the market Duraflex (suggestions should be well thought
which Duraflex may also want to capitalise on out)
Introduce sub-brand or increase promotion of
Building a stronger image among blue collar
workers may entice them to try other brand with a focus on blue collar workers: may
include on- site promotions, advertising in industry
Duraflex footwear products
publications, or advertising in magazines / on
television during programmes with a higher blue
collar readership / viewership
3. What changes would you recommend to Duraflex’s work boot strategy? Why? Would
you recommend they introduce a sub-branded boot line?
Emphasize casual boots
Justification: Implications:
Stronghold for Duraflex right now (40% market Unlikely to be a strong competitor reaction,
share) since Duraflex is already dominant player
Fastest growing market Duraflex will not need to enter new
distribution channels
Represents approximately 40% of Duraflex’s
business (from question 1), making it very difficult to Candidate should discuss a strategy for work
profitably ignore this market boot market – either winding down, maintenance
etc. and implications of this
Focusing additional resources on work boot market
would risk of alienating casual boot buyers (white
collar workers and students)
“Style” is the top BPC for Duraflex (from Exhibit 3).
From the statistics on Badger and Steeler, we know
this is likely not an important criteria for the work
boot market. By focusing on the casual boot market
Duraflex can devote additional resources to keeping
up with styles to better appeal to this target
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