Case Analysis Assignment: Key Challenge Facing the Firm (Case Study Sample)

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Case Analysis
Key Challenge Facing the Firm
Montes Calçados (MC) faces a problem of declining sales and profits. Since 2009, the company had been growing at an average of 3% per annum, which was in line with the industry averages. However, in 2017, the firm realized a fall in sales and profits. In 2016, its total revenues were 412 million Reals but dropped to 406 million in 2017. Although the number of shoe pairs sold increased, the average selling price per pair declined from $32.63 in 2016 to $30.64 in 2017. Worldwide, the number of pairs sold increased, but the numbers dropped in the key market of North America. Consequently, Victoria Montes, the firm’s president, organized a three-day meeting in New York to discuss some of the strategies that the firm could adopt to avert the situation.
The e-commerce trend in the market presented a challenge that the firm needed to examine. According to the case study, online sales were growing in Europe, the United States, Asia, and South America. Evidently, this situation provided an opportunity for the company to increase its revenues. However, Montes was concerned about the potential impact such a move would have on the current retail partners. Another problem related to the expansion to smaller markets. Although sales would increase, the firm faced a risk of losing its core customers due to brand familiarity. Additionally, it might be forced to lower its prices to accommodate the price-sensitive clients in these markets. Thirdly, the company had to make a decision regarding whether to continue pursuing the fashion strategy or attempt to build classic or long-term iconic styles. Fourthly, while MC focused on consumers between the ages of eighteen and thirty-five, the actual customer demographic was aging. Consequently, it had to decide whether to embrace the older consumers. Finally, the meeting also aimed to discuss whether MC should adopt a global position instead of the conventional Brazilian image.
External Analysis
The external environment, which encompasses factors that are outside of a firm’s control, has an impact on financial success of a business. To start with, the global women’s shoe market is growing at a rate of about 3%. In 2016, the global footwear market generated revenues of about US $216 billion, with women’s shoes accounting for 60% of the sales. The US women’s shoe market is the biggest globally, posting $20 billion in manufacturing sales annually. The US female consumer, on average, buys three shoe pairs at a price of $49 each. It is also important to note that about 80% of women would tolerate shoe pain for fashion. In Brazil, the footwear industry is considerably large as it accounts for 6% of shoes produced globally. Overall, the industry seems profitable and with a potential to grow.
Concerning the competition, the footwear industry has low entry barriers, and, as a result, the risk of new entrants is high. Currently, MC faces competition from established companies, such as Nike, Gucci, Clarks among others. In Brazil, there are over six hundred shoe manufacturers that are competing on both American continents and other parts of the world. Lastly, the company targets the women’s market, which is highly segmented based on aspects such as age, lifestyle, occupation among others. From inception, the company focused on younger women (between the ages of eighteen and thirty-five) who prefer fashion, design, and style rather than comfort. In addition, about 40% of the firm’s customers are women above the age of thirty-five. The challenges associated with the female consumer base lie in the fact that it is difficult to predict and influence clients’ buying behaviors. Besides, fashion cycles are extremely short.
Internal Analysis
Firstly, although the business is family-owned, it developed an ownership structure that encompassed a number of investment companies and private individuals who sat on the board. As a result, MC avoided the common challenges that family business experience. Secondly, the company developed a broad product line to meet the diverse and ever-changing needs of the customers. In fact, the firm had over fifteen thousand stock keeping units and a sophisticated supply chain system. Thirdly, MC had seventeen designers and several artisans in Sao Paulo as well as five designers in New York City. They had a responsibility of introducing major lines in conjunction with retailers.
Fourthly, MC implemented an innovative and strategic pricing system that allowed retailers to make profits. Fifth, the company had an integrated communications system in place, which supported effective product promotion. Furthermore, MC fostered mutually-beneficial partnerships with retailers such as Nordstrom. Through the partnerships, the company was able to access lucrative markets in the US and other parts of the world. It also granted some exclusivity to some small retailers to attain good placement. In 1992, the company started opening freestanding stor...