Tapal

COMPANY BACKGROUND

Smart Shoes Pvt Ltd was founded in 1985 in Karachi to provide a wide range and variety of shoes in the local and international market. While Smart Shoes Pvt Ltd has grown to a 500 million Rupee business, sales fluctuate widely from year to year and profits are less than a 50 million Rupees per year.

To reverse this unsatisfactory performance, and reduce dependence on existing products of the company, Smart Shoes Pvt Ltd is considering the feasibility of producing and marketing a new product within its "smart casual" product line. Currently, it has three product lines: smart formal, smart casual and smart regular. It plans to expand its product line for casual shoes. It plans to introduce a new product in the form of joggers within this product line. The name of the product will be Mach II.

Consumer surveys indicate that with the exception of some people, response to the Mach II idea has been extremely positive from most of the target audience.

The purpose of this plan is to develop a marketing strategy to introduce Mach II into the market and achieve profits of Rs. 55 million by 2005.

MARKET ENVIRONMENT

This section discusses the actors and forces outside marketing that affect the company's marketing management's ability to develop and maintain successful transactions with its customers. The macro-environmental factors for the local target audience for Mach II (i.e. in Pakistan) that affect the company are discussed below.

Demographic forces

In Pakistan (the local market for Mach II) a large proportion of the population comprises of children and teenagers. Secondly, the population density is very high in certain cities like Lahore, Karachi, Multan, and Rawalpindi, etc. Most of the people who wear joggers belong to these urban areas. Thus the growing population in the country may indicate a potential for growth in target customers.

Economic forces

Over the years the national income of Pakistan has increased. However the population has also increased. Hence, there have been mixed effects on the buying power of customers. As is the case with most developing countries, inflation is relatively high in Pakistan. Competition in the market for joggers comprises mostly of foreign companies with high prices.

Political forces

Over the years, there has been political instability in Pakistan. However, recently the government has adopted some business-friendly policies. It must also be noted that the increase in emphasis on ethics and socially responsible actions globally is also starting to affect businesses in Pakistan.

Cultural Environment

As time progresses people in Pakistan are increasingly valuing their health. There is a growing trend towards exercising, walking, jogging, and taking part in games. Hence the use of joggers have increased in recent times - indicating an increase in demand.

Technological forces

Improvement in production technologies have created an opportunity for cost reduction. However, as the costs of all firms can be reduced with the use of advanced technologies, a threat may also arise.

INDUSTRY SIZE AND GROWTH

In Pakistan the size of the joggers industry at present is relatively small. Only a few local firms produce joggers. Bata and Service are only the two main companies in Pakistan that manufacture joggers.

Nonetheless, due to increasing demand for joggers both in Pakistan and in the International market, the size of the industry is expected to grow. Hence Smart Shoes Pvt Ltd can not only produce Mach II joggers for the local market but also export them. The company can also take advantage of the relatively small size of the industry at present.

COMPETITIVE ANALYSIS

Local Competition

The local competition for Mach II include two firms, Bata Shoes Ltd and Service Shoes Ltd. These firms are in direct competition with Smart Shoes Pvt Ltd and can create difficulties for it in introducing Mach II. It is expected that one or both of these firms will respond by an increase in promotion of and reduction in prices of their joggers when Mach II is introduced in Pakistan.

Foreign Competition

Many foreign firms are selling their joggers in Pakistan. Nike, Adidas, and Reebok are the major foreign firms selling their joggers in the country. Nike has been the most successful of these and has also opened its own outlets in various parts of the country.

All these foreign companies have priced their products very high - with the lowest price of any Nike jogger exceeding Rs.1500. Hence by providing good quality at a much lower price, Smart Shoes Pvt Ltd can make Mach II compete well with these foreign firms.

FIGURE 1.1-Market share for local and foreign competition in Pakistan.

DEMAND/ MARKET SITUATION

Shape of the Demand curve

The demand curve for Mach II joggers is negatively sloped. This indicated that more customers will demand Mach II as its prices are reduced. The demand curve is depicted as under.

Figure 1.2- Demand curve for Mach II.

Price

(Rs.) Demand

for Mach II

Quantity

Demanded