What Are Crocs Core Competencies? Crocs Has a Number of Core Competencies

Question 1: What are Crocs core competencies? Crocs has a number of core competencies:

• highly responsive supply chain

• global capabilities

• ability to service small retailers

• grass-roots funky marketing

• can-do culture

• product design

At the time of the case, these competencies provided a number of important advantages for Crocs:

• Highly responsive supply chain: enabled the company to produce additional product during the selling season to fully meet customer demand.  In the traditional supply chain, a seasons sales would be limited to pre-booked orders plus a small additional build of about 25 percent.  Thus, it would be impossible for a traditional manufacturer to achieve the explosive growth that Crocs has experienced.

In addition to creating the capability to build additional product during the selling season, Crocs added extra production capacity (1 million pairs per month at the time of the case) in order to be able to immediately respond to increases in demand and increasing flexibility in making production decisions.  It also had redundant operations (e.g. in compounding and molding), so that production could be quickly shifted to the location best suited to meet demand.

• Global capabilities: enabled Crocs to draw on the unique strengths of operations in all parts of the world to meet its production needs.  In China, Crocs could outsource production to low-cost, highly flexible suppliers.  It could produce in Canada for the local market as well as for countries such as Israel that have duty-free relationships with Canada.  It could utilize the proximity of its Mexican operation to provide rapid response to supply needs in the U.S..  These global supply chain capabilities supported the companys global marketing strategy.

• Ability to service small retailers.  Small retailers played an important part in Crocs growth, and comprised a significant source of revenue.  They were important in establishing the brand, provided marketing buzz, provided feedback and test market outlets for new products which reduced fashion risks, and generated good margins.  However, small retailers were more difficult to serve, as they generally bought in small quantities and did not have warehousing capabilities.  Thus, Crocs flexible supply chain was essential to serving these retailers.  Once established with small retailers, large retailers sought out Crocs and purchased on very favorable terms.

Crocs was able to solve a serious problem faced by small retailers inventory shortages and overages due to the need to pre-book orders before the start of the selling season.  The Crocs supply chain allowed these retailers to avoid the risk of ordering too many shoes, and thus having excess that would have to be sold at a discount at the end of the season, while at the same time avoiding the lost sales that would result from stockouts.  Solving this problem was a very powerful factor in developing strong relationships with retailers.

• Grass-roots, funky marketing: This enabled Crocs to establish its brand, despite having a highly unorthodox product by traditional fashion standards.

• Can-do culture:  Crocs looked at its business environment and decided what it needed in order to achieve success.  It then executed without regard to what was normal in its business.  It needed to be able to provide product to customers when they wanted it, in the amount they wantedand it created a way to do that.  It needed to be able to serve large customers who needed high quantities delivered to a distribution center, as well as small customers who needed small quantities delivered to their selling location and it created a way to do that.  The attitude at Crocs was not to be limited by conventional approaches, but rather to find ways to do what it felt was best for the company and the customer.

One example of the can-do attitude is that when Crocs implemented its ERP system the vendor told Crocs that it would take more than a year.  Crocs told the vendor that it needed to be done in 4 months and it was.

This attitude comes from several sources.  First, the management team was not prejudiced by the conventional way to run a shoe business.  Snyder and his team did not know the standard practices in this industry, and developed their approach based on what they thought made the most sense.  This can be seen in several places, such as the production model and the companys approach to the industry norm of charge-backs and discounts in large retail contracts.  Secondly, the Crocs team had previous experience in running highly responsive manufacturing organizations, and had a thorough knowledge of best practices.  Thus, they knew that ERP implementation could be done in 4 months, and knew how to find the people that could do that.  They also knew that they could set up manufacturing operations if contract manufacturers could not meet Crocs demands for flexibility and short lead-time production.

This resulted in a culture in which the bar was set high and the team demanded operational excellencewhich they believed they could achieve.

• Product design: Crocs sold a differentiated, highly popular product, thought by some to be a fad.  The implications of whether or not the product was a fad are important, and can be part of the class discussion.  Regardless of whether students think the product is a fad, it is important that management plan for the possibility that the initial Crocs design goes out of fashion.

Question 2: How do they exploit these competencies in the future?  Consider the following alternatives:

Further vertical integration into materials.  The materials used in the standard Crocs shoes are low cost chemicals, which are largely commodities in nature.  They can be produced by any major chemical company.  There is little advantage (cost or otherwise) to taking this in-house, and it would take them into a very different industry.  

Growth by acquisition.  Crocs had made several acquisitions as of the time of the case.  The first (Foam Designs) was essential in gaining control of the intellectual property and production of Crocs shoes.  The others were small, providing specific capabilities that Crocs could utilize, and to which Crocs offered new opportunities for substantial growth.  Consider the acquisition of Ocean Minded.  This was a very small company serving a market that fit well with Crocs.  However, it had limited distribution, and under the traditional production model had very limited growth prospects.  After being acquired by Crocs, it had access to a large network of retailers who were eager to sell Crocs products because of Crocs ability to provide exceptional service and to refill supplies.  In its first months as part of Crocs, Ocean Mindeds sales skyrocketed.