Background information
KenSpo is a private limited enterprise that operates in the US footwear and apparel industry. The firm deals in designing and production of high-end fashion footwear and apparel products. In the course of its operation, KenSpo intends to maximize its profitability potential hence its competitiveness.
Moreover, the firm also intends to attain an optimal market position within the footwear and apparel market by producing high quality footwear and apparel products.
Thus, the firm appreciates the importance of product development in its strategic management process. To achieve this, the firm has incorporated research and development amongst its best management practices.
After conducting a comprehensive environmental scan, the firm has identified a market opportunity with regard to development of sports sneakers. To exploit this market opportunity, the firm intends to design and produce a unique sports sneaker.
Objective
Main objective
By producing the new sneaker, KenSpo intends to achieve the following;
- To attain a 15% market share in the US sports sneaker market in 5 years.
- To diversity into different sports products by engaging in product line extension in order to attain high competitive advantage.
Short term objective
The firm is of the objective that the new sports shoe will boost its annual financial performance considerably. Upon its introduction, it is expected that the new sports shoe will increase the firm’s net profit with a margin of 10% within one year.
Additionally, KenSpo intends to attain sales revenue of $5 million within 1year after launching the product.
Source of funds
The process of designing and production of the new sports shoe will exclusively be funded using a bank loan. The amount being sought for the entire project is $ 1.5 million that will be repaid in 1.5 years. Decision to fund the new product using loan was informed be need to invest retained earnings in other ventures.
Business premises and location
KenSpo will establish a well designed business premises that will strategically be located in Ann Arbor, Michigan. The premises will exclusively carry the new sports shoe product.
Decision to locate the premises at Ann Arbor City is informed by the fact that the firm intends to exploit the business opportunity provided by numerous fans who attend NFL matches at Michigan Stadium.
Human capital
In the course of its operation, KenSpo is committed at providing customers with high quality products; consequently the firm will outsource experienced sports footwear designers to aid in the designing and development of the new shoe.
This will aid in ensuring that the new sports shoe is of high quality in addition to meeting the sports shoe specification.
Customers, competitors and promotion
KenSpo appreciates the importance of conducting comprehensive market research in an effort to attain a high competitive advantage. Consequently, the firm has integrated both competitor and consumer market research. The market research aids the firm in the process of formulating its marketing strategies.
Findings of a market research conducted by the firm revealed that there is high market prospect for sports products in the US. The demand for sports apparels and footwear is high across diverse customer categories. Consequently, the firm mainly targets both youthful and elderly sports fans.
Competitor analysis
The US sports and footwear market is relatively large in nature. Moreover, the market has a high growth potential as a result of the large number of consumers who are increasingly appreciating sports.
A study conducted by the Sports Goods Manufacturers Association in 2012 revealed that sports footwear product account for 35% of the total footwear market in the US. This indicates that there is a high growth potential.
The high growth potential has led to a high rate of market entry by both large and small enterprises in order to serve the high market demand. Consequently, KenSpo will experience intense competition from both local and international firms.
Some of the firms that will be a threat to the firm’s market penetration effort include Fila, New Balance Athletics, Nike, Addidas, Reebok and Puma which have already attained an optimal market position.
Product promotion strategy
To ensure that the new sports shoe is successful upon its market introduction, KenSpo will incorporate a comprehensive promotion strategy. The strategy will take into account Integrated Marketing Communication (IMC).
Decision to use IMC was informed by the need to create sufficient market awareness on the new shoe product. The IMC promotion strategy will incorporate both offline and online promotion methods. Some of the methods that will be used include use of advertisements, sales promotion and public relations.
Diverse market awareness tools which include traditional and emerging marketing communication tools will be used.
Examples of traditional advertising tools that will be used include television and print media. Social networking technologies such as Blogs, Wikis, You Tube and Facebook will also be incorporated in creating market awareness.
Pricing strategy
KenSpo will ensure that the new shoe product is well priced in order to attract potential customers. In the market introduction phase, penetration pricing strategy will be used. The price point of the new sneaker will be set at $ 129.
This shows that psychological pricing strategy will be used in order to appeal to customers’ emotions in their purchasing process.
Sales forecasts, costs, profit forecast
By introducing the new sneaker, KenSpo expect to attain sales revenue of $5 million within 6 months after launching the product. Additionally, the firm has projected to attain a profit of $ 3 million within one year.
To attain the projected sales revenue, KenSpo will ensure that the new sneaker successfully penetrates the market. To achieve this, KenSpo will incur a considerable amount of cost. The chart below illustrates a summary of the cost that the firm expects to incur.
Reasons why the business will succeed
Findings of a market research conducted by a number of KenSpo’s departments which include the marketing and the research and development departments reveal that there is a high probability of the new sneaker gaining sufficient market acceptance upon its introduction in the market.
One of the factors that will enhance its acceptance relates to the high rate at which consumers in the US are appreciating sports in their consumption patterns. Additionally, the product will be of high quality hence satisfying the customers’ needs.
As a result, there is a high likelihood of the sneaker appealing to a large number of potential consumers’ hence increasing efficiency with which it will attain the break-even point.
Appendix
Cash flow statement
The chart below illustrates the expected cash flow statement for KenSpo for the first one year upon launching the new sneaker.