Mkt 101 G

Batingal, Marinella Crisostomo, Monique Ilustre, Annah Cassandra Prado, Paula ATENEO DE MANILA UNIVERSITY

Havaianas Aqua

A paper submitted in partial fulfillment of the requirements in MKT101: Principles of Marketing

TO: Mrs. Maria Teresa Cano Lopez

BY: Batingal, Marinella Crisostomo, Monique Ilustre, Annah Cassandra Prado, Paula BS COMTECH

ON 14 October 2009

I.

Marketing Background

A. Overview of the Industry 1. Market Size In 2008, Euromonitor issued out a value of 2.98% or P137.6 billion of P4.607 trillion in total 2007 consumer expenditures on clothing and footwear in the Philippines wherein 9.7% was spent on footwear amounting to P13.3 billion. It was shown that from the review period of 1995 to 2007 spending on footwear went up to 115.3%. Moreover, the Philippines tries to maintain a yearly requirement of producing 46 to 51 million pairs. In fact, in 2006, the country made the footwear sector as one of its main focus in developing industries as indicated by _______

Figure 1.7 Philippines Footwear Consumer Expenditures % Analysis/ % Growth 1995 6.9 2000 9.4 2007 9.7 1995-2007 115.3 2000-2007 45.6

Source: National statistical offices, OECD, Eurostat, Euromonitor International

Through the recent years, the world and Asia pacific footwear market has steadily grown in terms of volume and value. In 2006, the world footwear retail volume reached up to 6,989,852,700 units which equaled to the world retail value of 201,903,100 US dollars. Furthermore, 50% of footwear sales come from womens footwear, 37% from mens footwear and the rest on childrens footwear. The Asia Pacific footwear retail volume reached up to 2,651,438,400 units which equaled to 46,986,800 US dollars.

Figure 1.1 World and Asia Pacific Footwear Market Sizes from 2001 to 2006 Categori es Footwea r - Retail Volume - '000 units Footwea r - Retail Value RSP US$ mn Footwea r - Retail Volume - '000 units Footwea r - Retail Value RSP US$ mn Asia Pacific 37200.2 38090.1 40621.2 43771.2 45484.2 46986.8 Asia Pacific 1863219 .9 2018589 2136789 .9 2255144 .4 2409672 .9 2651438 .4 World 157709. 5 156632. 3 171254. 9 186967. 5 195254 201903. 1 Geographi es World 2001 5484737 2002 5646936 .7 2003 5860482 .4 2004 6208749 .3 2005 6580605 .2 2006 6989852 .7

Source: Euromonitor International Figure 1.2

Source: Euromonitor International

Figure 1.3

Source: Euromonitor International

Figure 1.4

Source: Euromonitor International

Figure 1.5

Source: Euromonitor International

Figure 1.6 Philippines Footwear Consumer Expenditures in Ps Billions

1995 6.2

2000 9.2

2002 10.5

2004 11.5

2006 12.4

2007 13.4

Source: National statistical offices, OECD, Eurostat, Euromonitor International

Sports footwear continues to dominate the footwear market. With casual footwear renovating to a more sporty look, the sports or athletic footwear market grows. Sports shoe brands such as Nike, Reebok, New Balance and Adidas have showed to have greater market shares in the footwear industry. Nike tops them all by being the single largest brand. It has become a recognized brand thanks to its brand awareness efforts such as celebrity advertising and store merchandising.

Figure 1.6 Global Sales and Market Share of Athletic Footwear Global Company Global Sales Market Share (%) Nike Reebok New Balance Adidas K-Swiss Converse Vans Puma American Sporting Goods (Avia, Ryka, 6780 1963 1357 3150 480 905 395 1396 303 33.2 9.6 6.6 15.4 2.4 4.4 1.9 6.8 1.5

Nevados, Turntec) Asics Keds/Pro-Keds Foot-Joy Fila Saucony Sole Technology And 1 Mizuno Hi-Tec Brooks Lotto Other Total 920 203 180 305 141 140 175 287 191 126 141 873 20411 4.5 1 0.9 1.5 0.7 0.7 0.9 1.4 0.9 0.6 0.7 4.3 100

Source: (Drbul et al. 2006)

2. Market Trends More shoes for better earning Women In the recent years, women have shown to be a rising number in the workforce. With the growing education sector, women become more educated opening more working opportunities and even higher incomes for them. Women then opt for marrying at a later age since their careers have become a high priority for them. On another note, better child care facilities are being offered which makes

it easier for women to join the workforce. With this, women enjoy increasing incomes that obviously lead to greater consumer power. Since women earn more, they also spend more. A mounting trend with the women of today is retail therapy. To women, footwear has been an important item to spend for. Subsequently, given the womens priority for their careers, an increased awareness has dawned on them of keeping fit and healthy for such a fastpaced lifestyle. Athletic footwear has then become another priority in terms of their range of footwear. Comfort and style are essentially valuable factors in their choice of footwear. Spending preferences of Young Adults Aside from women, young adults have also opt to marry at later ages such as their thirties. In effect, young adults have become big spenders of clothing and footwear. Moreover, they tend to buy these more frequently and go for quality products. In line with the influence of media, they have shown greater preference for products that are fashionable and trendy. They have become less formal with their clothing and footwear. Men prefer sportswear and women prefer to be less formal. Health concerns Today, an obesity epidemic is emerging. According to the World Health Organization, there are about 300 million obese people and approximately one billion overweight people. In Asia, the Philippines is considered as the third fattest population right after Malaysia and Singapore. There are approximately five hundred thousand Filipinos who are obese.

These people have shown to have a particular need for better cushioned shoes and other specialty footwear. Moreover, an increasing awareness of this issue leads to interest in physical activities which, again, would pave the need for comfortable athletic footwear. Casualization: Western Wear Trend in Asia Pacific Casual attire has been a favorite for various kinds of social settings. With peoples changing mindsets in regards to fashion, casual attire has then become acceptable in even formal settings like the workplace. More than that, casual attire has become a general preference for dressing. Athletic footwear is a sure key item in casual dressing since comfort and style continue to be significant elements. Developing specific needs of consumers Aside from the awareness of such brands, consumers have developed specific needs for their activities. In response to this, companies have developed specialty lines which specify whether the shoes are meant for running, biking, and other categories. Product development has been ongoing to cater to these needs. The development of new technologies for shoes widen the possibilities of generating more products. For example, the Nike Lunar Glide provides a unique cushioning system that would enable just the right support. B. Market Profile Everyday wear of sportswear for Filipinos has constituted as a big chunk of the athletic footwear market. Furthermore, since there has been an amplified global attentiveness on sports, Filipinos have become more adventurous in engaging in different kinds of activities may it be sports or even social events. With all the

activities that the contemporary Filipino has to do, comfort becomes a big deal breaker in every footwear purchase. Subsequently, this kind of comfort is usually equated with athletic footwear as well as with new alternatives like Crocs and Havaianas. Footwear is purchased by all types of market segments varying in terms of price and specific function. Slippers are indispensable in any household whatever demographic the consumer may belong to. Athletic footwear also seems to be a compulsory item for kids and teenagers since they need this for a required basic subject, Physical Education. It is also one of the most used type of footwear since all the different market segments engage in some kind of strenuous physical activity. The purchase of other kinds of footwear would vary depending on the consumers taste and the occasion needed for. Footwear could be bought through almost any distribution channel. It could be purchased from marketplaces, malls, bazaars, online shops , direct sellers, designers and the like. The increase of purchase of footwear would diverge depending on the season and footwear type. Consumers would usually purchase water-durable or water-intended footwear during summer or the rainy season. On the other hand, consumers would usually find themselves occasionally buying the whole year round out of whim or out of personal reasons. Consumers still have as their footwear choice multinational brands such as Nike, Adidas and New Balance which continue to lead the market. They are considered leaders for the latest fashion trends and technologies. Moreover, their incessant strong brand awareness efforts make them the major preferences when it comes to footwear.

C. Environmental Analysis 1. Analysis of Opportunities and Threats Opportunities Availability of Sports through Media With the media saturation today, sports has undeniably become more available to people. Even with the issues of recession, sports has been an aspect that people continue to pursue because of its usage as a stress buster. In fact, according to the FDS International's Supporting Sport survey of 2007, 70% of respondents from 16 countries claimed to be interested in sports in general. Given this heightened interest in sports watching, an increased participation in sports is inevitable which would lead to greater consumption of sporting goods especially athletic footwear. Fitness Hype Due to the surge of sports awareness, greater consciousness is also bent on fitness. Since Filipinos have been more concerned with leading healthy lifestyles, they have been more intact of ways to become more fit. Thus, the emergence of gyms, supplements, specialty drinks and the like. Most especially today, more and more people are hitting the gym and engaging in physical activities. This doesnt just include the young and on-the go consumers. More than that, the Baby Boomers are more apprehensive of keeping fit and healthy. They become a more attractive market as fitness is now a high priority for them. Aside from that, they have more money to spend on such a cause. They would then want to participate in different kinds of physical activities whether it be running, skiing, swimming, scuba diving

and many more. Undeniably, athletic footwear is an anticipated necessity for engaging in these different kinds of fitness endeavors. Beach tourism In the Philippines, there has been an increasing popularity of heading to beaches. Most popular of these beaches are Boracay and Palawan. In line with this, many Filipinos and foreign tourists become aware of the different offerings at the beach especially water sports. Some of these water sports would include water skiing, parasailing, windsurfing, wakeboarding and the like. For these off-the court outdoor activities, a growing market is building up for athletic footwear that would specifically cater to such activities. Athletic translates fashion Although a great number are interested in sports, this would not always translate to them actually engaging in it. Some are just confined to consuming sports simply by just watching it. Nevertheless, this inclination to sports influences their choice of fashion. More than ever, celebrity athletes have proven to be icons even in the aspect of fashion. This has pushed athletic footwear more to be regarded as casual wear, thereby, increasing consumption by different generations. Growing market for footwear As of June 2009, the National Statistics office has issued that the Philippine population numbers about 92,226,600 with gender distribution being almost equal. As of 2005, teenagers, those in the ages of 13 years old to 19 years old accounted for about 12,771 while young adults, those in the ages of 20 years old to 29 years

old accounted for about 15,125. Due to this, it has been expected that those in these age brackets would produce a high demand for footwear. Resilience of higher income segment to pricing changes Despite the global economic crisis, high-end brands continue to progress. In effect, other consumer goods manufacturers find that the higher income segment shows to be an attractive group to focus on. It shows that basic necessities like food and shelter arent the only expenses Filipinos value. The higher income segment still proves to value brand equity and product quality. Given the high pricing for famous footwear brands, these consumers continue to patronize it. Increasing value of comfort to consumers Nowadays, rather than going for just the design of the footwear, consumers have become more particular of its fit. Comfort deems not only to be a factor but a major clincher in their choice of footwear. True to this, there has been an evident rise of footwear brands and lines that offer different kinds of specialized technology intended for maximum comfort. For example, Crocs features their Croslite material which enables Crocs to produce soft, comfortable, lightweight, superior-gripping, non-marking and odor-resistant shoes. Threats Small slice of the budget pie for footwear In the Philippines, consumers spend about an approximate 10% of their income for clothing and footwear. Across all consumer incomes, it has shown that consumers spend the same percentage for footwear. This could prove to be a difficulty in increasing footwear volume and value.

Availability of cheap China-made footwear Because of the presence of informal retailers like tiangges which offer Chinamade footwear or counterfeits , they have been an emerging competition for private labels. Due to the economic situation of the Philippines, Filipinos have become more conscious of prices. Since these kinds of footwear are 50% - 80% cheaper, these have been most especially favorable to those who have lower income. Although, over time, it is expected that these consumers would eventually prioritize better quality products. Competitors going for same marketing strategies Since most of the brands are riding on the same marketing strategies in terms of product, price, place and promotions, it makes it hard for both competitors and consumers to mark a distinction for the different products available in the footwear market. By product, most of the competitors have been riding on the same product features namely specialized technology. By price, competitors who go for the same target market also have relative prices. By place, competitors have stationed themselves in the same areas. By promotions, most competitors have used sports to advertise its products. 2. Key Success Factors Celebrity advertising Celebrity endorsements and sponsorships are fundamental advertising practices for market leaders such as Nike and Adidas. In the world and in the Philippines, Nike gets sports celebrities as its brand ambassadors. Because of such

efforts, there is great awareness of these brands. Due to the values that brands embody through such endorsements, many aim for these kinds of products. Athletic footwear turned casual footwear Athletic footwear deems to not only be limited to needs like physical activities. Because of the changing trends in fashion, athletic footwear is now seen as an option for casual wear. Moreover, there has been an increased penchant for footwear that has comfort as a key feature. More people are then turning to athletic footwear as necessary purchases fashion-wise and comfort-wise. New Fashion Lines There is no stopping to the various kinds of athletic footwear being developed and manufactured. Many companies are developing new materials or technologies that would make their products more appealing than just the average offering of comfort and style. Furthermore, brands also try to keep up with other emerging trends. For example, there has been the development of incorporating iPods with footwear. Also, the creation of new fashion lines for different seasons garners as a plus in offering consumers fresher concepts.

II.

Competitive Analysis

A. Competitive Positioning The group has chosen 4 main competitors in aqua shoes footwear namely Nike, Adidas, Speedo and Keen. Nike, Adidas and Speedo are known for selling quality footwear, thus having strong brand loyalty from customers. Keen is not well known,

but the group believes that Keen is the strongest competition to our proposed product as they sell products that offer both design and function. Nike basically promotes their aqua shoes as second skin of the foot. This is because the strongest feature that their aqua shoes supposedly have is a very strong grip. It is designed primarily to have strong grip and traction on wet surfaces. Adidas promotes their aqua shoes as having a 360 degree cooling for the entire foot. The technology they used on their shoes is basically designed for comfort. It also adds to the given feature of aqua shoes which is having good traction against slippery surfaces. Speedo is mainly a company as focusing on water sports apparel. They promote their products as developing footwear from the inside out. Their footwear is designed to have overall function like complete breathability, drainability, grip and comfort. Keen differentiates itself from the other competitors as they offer eco-friendly products that are made out of recyclable and biodegradable materials. Their aqua shoes for women are mainly promoted as sweetly feminine and uniquely functional.

B. Market Shares/ Sales Volume/ Sales and Profit Trends Based on the clothing and footwear retailers brand shares by value of 2005-2008 in the Philippines, Nike brand under Nike Philippines Inc. is the said market leader in the footwear industry with a 2.2% sales value last 2008. Nike is at the same level with Levis under Levi Strauss Philippines Inc. with also a 2.2% sales value last year. They are followed by Adidas under Adidas Philippines Inc. with a sales value of 0.9%. Bench, Cinderella and Penshoppe each has a sales value of 0.7%. Hang Ten and Rusty Lopez have 0.3% and 0.2% sales value respectively. Speedo under Sprint

International Inc. and Oygen each has a 0.1% sales value. Thus, all the other competitors under clothing and retail footwear share the remaining 92% of sales value last 2008. So basically, if we focus on the athletic footwear industry, we can assume the competitive positioning of our 3 main competitors. Nike as the market leader; Adidas as the market challenger; Speedo as the market follower as it follows at a distance; and the other companies which offer athletic footwear will fall under the market nichers. The following table will show only the 3 chosen main competitors in the athletic footwear industry, along with their percentage of sales in value in year 2008. Company 2008 Sales Value in % Nike Adidas Speedo Nike Philippines Inc. Adidas Philippines Inc. Sprint International Inc. 2.2 0.9 0.1

Source: Trade associations, trade press, company research, trade interviews, Euromonitor International estimates

Based on the data showing the trends in clothing and footwear specialist retailers in the Philippines, the specialist retailers are affected by the economic downfall, thus resulting to a minimal sales growth at 4% and sales stand at Php92 billion. However, up-market brands or those international brands still stand strong despite the challenges brought by the economic slowdown.

Well-known international brands such as Nike and Adidas stayed strong due to their quality and higher loyal customer base. These brands maintained and even increased their shares because of higher pricing strategies that they imposed. In fact, Nike retained its leadership in the clothing and footwear retailers with sales of Php2.02 billion. Levis followed Nike with its sales reaching to Php1.97 billion. These brands focused on their image of providing higher and better quality of products balancing their higher prices. Nike had the highest increase in share last 2008 because its customers were not affected by their pricing strategy. These international companies will continue using their products with its brand name to generate growth in sales. The following tables show the value in sales and the growth in the value in sales of clothing and footwear retailers in the Philippines from year 2003 to 2008.

Clothing and Footwear Retailers: Value in Sales from 2003-2008 2003 Value Sales Php million Source: Official statistics, trade associations, trade press, company research, trade interviews, Euromonitor International estimates 75,863.7 2004 78,367.2 2005 81,110.1 2006 84,273.4 2007 88,487.0 2008 91,584.1

Clothing and Footwear Retailers: Value in Sales from 2003-2008: % Growth

2007/2008 Value Sales Php 3.5 million

2003-2008 CAGR 3.8

2003/2008 TOTAL 20.7

Source: Official statistics, trade associations, trade press, company research, trade interviews, Euromonitor International estimates

C. Marketing Strategies

Product Nike Nike Classic Aqua Socks * 4-way stretch mesh

Price Php1,695

Place Nike Philippines, Inc. (Makati City, MM) * 45 retail stores nationwide

Promotions Endorsements for famous athletes. Like for swimming, Michael Phelps Endorsements for famous athletes. Like for swimming, Ian Thorpe Top female swimmers like Natalie Coughlin and Amanda Beard. Also endorsed Michael Phelps

Adidas

Boat CC * open mesh

Php1,995

Adidas Philippines, Inc. (Pasig City, MM) * 45 retail stores nationwide

Speedo

Womens Aqua Jane Slip-On Water Shoe * slip-on with elastic gore

Php2,388

Sprint International, Inc. (Muntinlupa City, MM) *17 retail stores nationwide

Keen

Madrid Ballerina * slip-on with a ribbed mesh and natural gum rubber outsole

Php3,840

* consignments to sports shops specifically like Tobys

Planet Shoes, a shoe retailer, in association with the manufacturer of Keen sells Keen shoes globally at lesser prices

The previous table presented showed the 4 chosen competitors in the athletic footwear industry along with their different marketing strategies for a sample of aqua shoes that they have. Product Nike has an existing product designed as aquatic footwear named Nike Classic Aqua Socks. The product is designed to have a very strong grip that would feel like the second skin of your foot. Embedded is a soft sock liner that adds comfort for engaging in water sports activities. It also offers grip and traction on wet and slippery surfaces. Adidas existing aquatic footwear is called Boat CC. Its design is based on the classic boat shoe. CC stands for ClimaCool, a technology which provides 360 degree cooling for the entire foot. It is basically designed for comfort through its synthetic lining and slip-on construction. One of its features is the water grip outsole to give good traction even on wet and slippery surfaces. Speedo is very much focused on swimming apparel and footwear. Thus, they offer a lot of different aquatic footwear. One of which is the Womens Aqua Jane Slip-On Water Shoe. For

its rubber sole, they used a technology called Hydro Tread that offers maximum traction and water dispersion. The product also offers 360 degree ventilation. It is also constructed as a slip-on with elastic gore for a more secure fit. Keen promotes Madrid Ballerina through the shoes femininity and function. The natural gum rubber outsole gives protection and comfort in walking through different landscapes. Each company had uniquely labeled and named their aqua shoes. The competitors din not show a clear system on the packaging used on their aqua shoes, except that mainly their shoes are packaged in large conventional boxes. Speedo uses recyclable cardboard sourced from Forest Stewardship Council (FSC) certified well-managed forests. For some products, the boxes contain product information. Price The price range for aqua shoes range from Php1,500-4,000. Among the competitors, Nike offers the lowest price. Adidas is priced higher than Nikes aqua shoe. Speedos aqua shoes prices differ by the features of the shoes that they sell. Same as for Keen, the prices also differ depending on the kind of aqua shoes since both Speedo and Keen offer a wide range of aqua shoes. The prices differ depending on the technology used on the shoe and the size and quality that they give. Basically, aqua shoes with fewer materials used are priced cheaper than those which are made up of different materials that would help the shoes perform better. Promotions The promotion strategy of Nike is mainly through endorsing famous athletes from different sports. Nike offers a lot of sponsorship arrangements with different

famous athletes like Michael Phelps, which Nike offered recent endorsements to for their swimming apparel. They also appoint their athletes to be their brand representatives in different countries worldwide. Basically, they cater to younger customers worldwide. Adidas followed the same promotional strategy as of Nikes. Adidas also focused on sponsoring and endorsing celebrity athletes and thus also focusing on the younger customers. They have endorsed world champion swimmer, Ian Thorpe. Just like the other athletic apparel companies, Speedo associate and promote their products through endorsing top swimming athletes like Natalie Coughlin and Amanda Beard who have competed wearing Speedo. Keen had a different approach, being known for producing eco-friendly products. Planet Store, a retail brand store with the same advocacy of recycling and using biodegradable materials, tied up with the manufacturer of Keen and decided to sell their products globally at a cheaper price. Mainly, companies try to create much brand awareness through the use of celebrity and sports advertising. Most especially in the season for particular sports, some brands such as Nike and Adidas launch huge campaigns to incorporate it in their products. In the Philippines, Adidas tied up with UAAP teams to make use of their products. It would then help increase the demand for athletic footwear in the season for that particular spoor. People usually show a greater following for sportswear during these times. Place There is a big number of Nike retail stores in our country. Just like Nike, Adidas has the same number of retail stores nationwide. Speedo has the lowest

number of retail stores in our country compared to Nike and Adidas. Keen sells using stalls located in different sports shops. Athletic footwear is very accessible since they are available in department stores and sports specialty stores. The multinational brands would sometimes have their own specialty stores which would usually have a wider range of product lines compared to the department stores. Aside from malls, they have also situated themselves in some gasoline stations. On a different scale, Filipinos who are more price-sensitive may fall back to imitations of such brands. An evident showcase of this is the presence of such products in local market places, tiangges and known bargain places such as Greenhills and Divisoria. D. Strengths and Weaknesses of Competition Athletic footwear had the highest market share in the previous years. Nike is the leading brand while Adidas was one of the sport footwear companies to contribute in topping the market shares. They have strengthened their brand equity due to the different advertising and marketing strategies imposed by these companies. Stronger relationships between customers were built, thus creating high income from their customers. The strong branding of the top sports companies stabilized the uprising challenge brought by the idea of private labels being the way to gain profit and increase sales. This idea of private labeling is a concern to brand manufacturers because it caused price wars that decreased the average unit prices of products. The main promotional strategy of the leading athletic footwear companies like Nike and Adidas is the numerous endorsements and sponsorships by contracting agreements with big sports celebrities. Sponsorships have become the

normal advertising and marketing strategy which will result to customers higher recognition of brands. Companies focusing on endorsing these athletes is a strategy that will surely continue and grow. However, a downside here is if the team or the athletes endorsed perform poorly, the brand would also be affected. Nevertheless, spending on these endorsements and costly advertisements did a great effect on the sports companies like Nike and Adidas as they were accountable for the growth of sports apparel as the clothing trend among youth today. Due to the strong effect of endorsements and marketing strategies done, huge sports events have increased the value of the brands of the different sports companies to their target young customers. Even to the extent of different controversies being thrown at some companies like Nike, sporting events still continue to increase Nikes value to their target market due to the sponsorships and endorsements they make. For a fact, the 2 leading sports apparel manufacturers, Nike and Adidas, top footwear sales. Different manufacturers are also constantly improving their products as new technologies are continuously being instilled in different kinds of athletic clothing and footwear, like Hydro Tread and Clima Cool in aqua shoes. These are all done due to the main purpose of providing comfort and efficiency in the said products. However, the companies would thus price their products higher because of the updated technologies applied in their products. This would probably weaken the competition as the buyers are becoming more price conscious. Another weakness is that all of the competitors fall under clothing and footwear industry, not mainly on the athletic footwear industry. Basically, they have a larger range of products to sell, thus not focusing only on athletic footwear. The companies sales on footwear compete with their own sales on clothing.

Nevertheless, it is still important that clothing and footwear retailers are now in fact dominating the distribution of clothing and footwear, and will continue to be the most important distributing channel of retail. With aqua shoes, based on the competitors strategies on selling specifically athletic footwear, there is a very weak competition in selling aqua shoes or casual beach footwear since all the leading competitors, Nike, Adidas and Speedo, are not giving much attention to it. For Nike and Adidas, they are more focused on selling shoes for training, more like running shoes and those that are used for land training especially. That could be seen on their advertisements as they usually spend more on advertising basketball shoes and clothing. Speedo offers a narrower or more focused range of products as the company caters mainly on athletic swimming apparel. Among the groups chosen competitors, only Keen offers a number of products which offer both design and function. Since only a small number of sporting shops are offering and focusing on selling swimming apparel, opportunities in selling clothing and footwear specializing in casual swimwear would probably increase due to the less number and strength in the competitors. III. Company Background A. Company Profile

SO PAULO ALPARGATAS S.A. So Paulo Alpargatas S.A., is a leading international branded company that started in Brazil more than 100 years ago. Though it is best known for its Havaianas thong sandals, it also turns out various kinds of footwear, sports clothing and other sporting goods, and a range of international textiles. It also

operates a chain of retail stores and is active in property development. The company is then divided into four business units Sandals, Sporting Goods, Industrial Textiles and Retail.

The companys origin dates back to 1884 when Juan Echegaray and Robert Fraser founded S.A. Fbrica Argentina de Alpargatas in Buenos Aires to produce a version of alpargatas, traditional Spanish light sandals worn by peasants and laborers. As they brought this footwear to Brazil in 1907, So Paulo Alpargatas S.A. was founded and production immediately began the year after. Since then, the company has gone through times of glory and decline, from being forced to stop their production and to close several factories because of market crashes and recessions to being the biggest textile conglomerate in Brazil with $422 million revenue and 30,000 employees. Over time, it has introduced various lines of clothing and footwear such the well known Havaianas flip flop in 1962, Madrigal bedspreads in 1967 and US Top faded jeans in 1972, among others. It has also bought competing companies such as Raihna Cala dos e Materiais Esportivos Ltda. and Jeaneration. Moreover, it has acquired license to manufacture and sell top brands like Arrow, Polo/Ralph Lauren, Van Heusen, Timberland Co. and Mizuno Corp.

Vision To be a world class company with desired brands of sport products, shoes, and industrial textiles. Mission To develop and commercialize innovative, world class and profitable products of high perceived value and quality and to create value for shareholders, employees, suppliers and customers through socially and environmentally responsible

operations. Business Philosophy Old: To turn out more goods, at lower prices, of the products in which it specialized changed in 1989 due to the economic crisis in Argentina New: To seek products with major brand recognition. So Paulo Alpargatas S.A. intended to become more a service than a manufacturing company, concentrating on marketing and on supervising the logistics of distribution

Organizational Structure So Paulo Alpargatas organization consists of Board of Directors, Board of Auditors, Internal Auditing, CEO, and seven departments: Sandals, Sporting Goods, Retail, Industrial Textiles, CFO, Human Resources, and Operations.

The Board of Directors has six members, four representing the controlling shareholder and two are elected by the minority holders of common and preferred shares. They are responsible for monitoring the execution of established policies to define the organizations strategy. The Board of Auditors consists of five members; three are nominated by the controlling shareholder and two by the minority shareholders. They are responsible for the deliberation of management reports and financial statements. Executive officers are those responsible for running the businesses and to ensure that So Paulo Alpargatas pursues its established objectives. Also, to execute deliberations of the Board of Directors.

Figure 3.1 Organizational Chart

Office Locations Brazil So Paulo Head Office Manaus Synthetic Fabrics Natal Sports Footwear Santa Rita Sports Footwear Campina Grande Havaianas Sandals Carpina Dup Sandals Pouso Alegre Coverings and Tarpaulins

 Argentina Uruguay Chile United States

So Leopoldo R&D Center

Buenos Aires Head Office Florencio Varela Footwear and Textiles Corrientes Textiles Saenz Pea Textiles Tucuman Footwear Catamarca Footwear and Textiles San Luis Footwear Santa Rosa Footwear

Dolores Footwear

Santiago Subsidiary

NewYork Subsidiary

Alpargatas - Head Office St. Funchal, 160 - Vila Olmpia

Campina Grande (PB) Havaianas Sandals Av. Assis de Chateaubriand, 4324- Distrito Industrial

B.

Current Position of the Company/Brand in the Market So Paulo Alpargatas S.A. has been establishing itself as a top quality

manufacturing and retail firm, catering to the high end market with products costing twice as much as similar brands. It is one of the leading companies in the industry and last 2007, it was given numerous awards and acknowledgements by several institutions. Best Company in the Apparel and Textile Sector, from Exame magazines

Maiores e Melhores Best Company in the Textile, Leather and Apparel Sector from the Valor 1000

ranking published by the newspaper Valor Econmico Best Company in the Textile, Leather, Footwear and Apparel Sector,

fromBalano Anual magazine, published by the newspaper Gazeta Mercantil Best Company in the Apparel Industry Sector, from the magazine Financial

Officer Most Admired Company in Brazil in the Sporting Goods Category, from the

Carta Capital / TNS InterScience survey in the magazine Carta Capital Most Admired Company in the Footwear, Leather and Accessories Category,

from the newspaper Dirio do Comrcio, Indstria & Servios.

Domestic operations of So Paulo Alpargatas S.A. are increasing their market share as of the 1st quarter of 2009 while international operations are currently at an initial growth stage. The companys strategy of investing in people, sourcing, and

manufacturing

operations,

logistics,

brand

communication,

research

development and information systems resulted in long-term profitability and value generation.

Table 3.1 Net Sales Revenues Brazilian GAAP Net Sales Revenues Domestic Operations International Operations Alpargatas Argentina Alpargatas USA and Europe 2008 439.3 345.5 93.8 86.4 7.4 1st Q 2009 455.9 340.8 115.1 92.5 22.6

Table 3.2 International Operations Consolidated International Operations Alpargatas Argentina, USA and Europe Brazilian GAAP Net sales revenues (R$ million) Sales volume: (000s of pairs) Havaianas 1,017 1,278 93.8 115.1 1st Quarter 2008 1st Quarter 2009

Topper and other footwear brands

2,476

2,285

Figure 3.2

C.

Company Strengths and Weaknesses Analysis STRENGTHS Pioneer and original, Global, large-scale production and distribution Strong products and brand names Huge and powerful company that can buy out competitors Has a huge following Knowledge on the target market WEAKNESSES Prone to imitations Sole manufacturer Limited advertisements

D.

Brand Consumer Profile

Identified Market Segment Since Terry S.A. Incorporated brought Havaianas in the Philippines in 2003, the company perceived that there is a ready market for Havaianas because using rubber slippers is common to Filipinos. It caters to all ages and gender, offering a wide range of slippers with different styles, designs and colors. Yet, it is geared more towards the high end elite market as the slippers cost a little less than a thousand pesos as compared to the locally made cheaper brands that are even less than a hundred bucks. It has turned into a status symbol than a commodity.

The bulk of the Havaianas Philippines market are women, accounting for 70% of the buyers. Men compose 20% and the children at 10%.

Market Needs Being Addressed More than just being rubber slippers, Havaianas represents three Fs thus making it the leading brand of flip flops in the country.

Source: http://www.havaianasphilippines.com/original/wearoriginal.php

Buying Patterns Havaianas has a huge cult following in the Philippines that some of its buyers have gone so far to making it as a hobby with collections ranging from 30 to 250 pairs. It has become close to the hearts of the Filipinos that they want so much of it as it makes them feel good. Despite its relatively high cost for a rubber slipper, Filipinos are still inclined into buying them. Having at least one pair means something for them; more so, since it has turned to a status symbol already.

Usage Habits Havaianas has indeed transformed the local perception of flip flops. From being the lowly plain footwear for home and beach, it has become a wardrobe essential that are now proudly worn anywhere and everywhere. It is paired with almost everything from bikinis and board shorts, jeans and shirts and even the dressier pieces.

E.

Present Marketing Strategy

Segmentation, Targeting and Positioning Segmentation Havaianas goes across all market segments. It has products for all ages with varied styles and colors to match different personalities and lifestyles of people.

Targeting Havaianas is geared more towards the high end market but is not limited to that. Though it is still more expensive than the department store variety, it has changed over time to accommodate the needs of the customers. It had set the trend and targets people who wants to be fashionable and trendy. Positioning Havaianas has established itself as one of the first class rubber slippers that people would spend on over the locally produced and imitations of the brand. Despite its high price, it promises quality that is sure worth every peso spent on it. Furthermore, it offers products that are not only fashionable but also durable and reliable.

Marketing Mix Product Havaianas hails itself as the best rubber flip flops in the world. They are made of a patented rubber formula by Sao Paulo that makes it ultra-comfortable and highly durable. A single factory in Brazil exclusively manufactures the slippers and all the other offices around globe are just distributors. The flip flops soles and straps come in varying colors such as dark brown, navy blue, black, magenta, gold, silver, royal blue, cyanic blue, tomato, white, forest green, pumpkin, blush rose and lavender blue, among others. There is also room for customization through an event called Make Your Own Havaianas which is

conducted roughly once a year in different areas in the Philippines. There they can mix their preferred colors of soles and strap then embellished it with various pins and Swarovski crystals.

Price Havaianas is indeed quite pricey as compared to the other brands of slippers being sold in the market. The price ranges from 400 to 700 pesos for the childrens line and 600 to 1,400 pesos for the adult collection. Special collections may also be available at a higher retail value. These retail prices are standard for all the authorized retailers in the country, as dictated by Terry S.A.

Place Havaianas flip flops are available throughout the globe. In the Philippines, Terry S.A. Incorporated is its exclusive distributor and the only one authorized to market the brand. The slippers are then made available to the public through

reputable establishments and retailers that are carefully selected and discerned by both Terry S.A. and Sao Paulo so as to ensure the brands integrity and the protection of its trademark. They are not currently being sold through the Internet but the Havaianas Philippines website can help you find stores where you can find the pair you want. Not all styles and collections are available in all stores since the supplies in each store vary from what they actually order from Terry S.A. There are also some special collections that are exclusive to certain outlets. Furthermore, the collections sold in the Philippines depend on the styles made available by Sao Paulo to the country, based on the carefully crafted marketing strategy of Terry S.A. Currently, there are 116 authorized Havaianas retailers in the Philippines and below is the complete list of them.
METRO MANILA AREA ALABANG : All Flip-Flops 2/F New Wing, Alabang Town Center Alabang-Zapote Rd., Muntinlupa City 807-7145; 809-0617 Celio UG/F, Alabang Town Center Alabang-Zapote Road, Muntinlupa City 850-4153 Kidsports UG/F, Alabang Town Center Alabang-Zapote Road, Muntinlupa City 807-5816 Rustans Department Store Alabang Town Center 850-5532 Stoked Alabang Town Center 772-1763

MAKATI CITY: Aloha Boardsports 3/F Power Plant Mall, Rockwell Center, Makati City 837-0118 All Flip-Flops 2/F Greenbelt 5, Ayala Center, Ayala Avenue Makati City 729-9322 2/F Glorietta 3, Ayala Center, Ayala Avenue Makati City 818-2508 Celio 1/F, Greenbelt 3, Ayala Center, Ayala Avenue Makati City 757-4926

J&S Surfshop 2285 Don Chino Roces Ave. 893-5766 Manila Polo Club 17 McKinley Rd., Forbes Park, Makati City 817-0951 loc. 258 Moana 1/F Power Plant Mall, Rockwell Center, Makati City 756-5104 Nail Spa Gamboa St., Legaspi Village, Makati City 817-3128; 830-0702 Orange Juice The PowerPlant Mall Rockwell Center 757-5096 Rustans Department Store Rustans Dept Store, Ayala Center 813-3739 Stoked The PowerPlant Mall Rockwell Center 856-4013 The Zone 7221 Malugay St. cor, Gil Puyat Avenue, Bel-Air Village, Makati City 894-0087 MANDALUYONG: All Flip-Flops E 317 SM Mega Atrium, SM Megamall Mandaluyong City 637-0989/638-5944 Celio 2/F, Shangri-La Plaza Mall, Shaw Boulevard Mandaluyong City 634-5402 Kidsports 4/F, Shangri-La Plaza Mall, Shaw Boulevard Mandaluyong City 633-6948 Nail Spa 2nd level, Shangri-La Plaza Mall, Shaw Boulevard Mandaluyong City 687-4991 Rustans Department Shangri-la Plaza Mall, Shaw Boulevard 633-4636 Souk 2nd level, The Ramp, Crossing Department Store, Shangri-La Plaza Mall, Shaw Boulevard 635-4410 MANILA: Rustans Department Store Robinsons Place Ermita 551-2788 All Flip-Flops 1/F Robinsons Place Midtown, M. Adriatico St. Ermita, Manila 567-2203 ORTIGAS/GREENHILLS: Orange Juice Virra Mall, Greenhills Shopping Center 725-1244

Stoked 4th floor, The Podium Mall 683-0736 2nd level, Bridgeway, Greenhills Shopping Center 723-9286 PASAY CITY: Stoked Ground level, SM Mall of Asia 556-0146 All Flip-Flops 2/F Entertainment Mall, SM Mall of Asia Roxas Bay Blvd., Pasay City 556-0639 Celio 2/F, Main Mall, SM Mall of Asia Roxas Bay Boulevard, Pasay City 556-0095 QUEZON CITY: All Flip-Flops Level M2 Trinoma, EDSA cor. North Avenue Quezon City 901-3978 All Flip-Flops Unit 213, 2nd level, SM Fairview Annex Quezon City Celio 1/F, Gateway Mall, Araneta Center Cubao, Quezon City 912-0247 Fiveforty Surfshop 227 Katipunan Ave., Quezon City 437-4816 Kidsports Level M2 Trinoma, EDSA cor. North Avenue Quezon City 901-3970 Nail Spa 5th floor, The Block SM North Edsa 441-0323 Rustans Department Store Gateway Mall Araneta Center 911-2401 Stoked 2nd level, Trinoma Mall 916-9708

TAGUIG CITY: All Flip-Flops Unit 960 and 962 Bonifacio High Street Fort Bonifacio Global City, Taguig 856-1390, 0906-578-3349 ROX Bonifacio High Street, Fort Global City 856-4639 Sepatu 2/F Market Market 322nd St., Brgy. South Side Fort Bonifacio, Taguig City 844-5544 Stoked Bonifacio High Street, Fort Global City 898-1913

Souk 2nd level, Serendra Piazza, Fort Bonifacio Global City 907-7040 LUZON AREA PANGASINAN: Tutti Footie Eastgate Complex, 231 AB Fernandez East, Dagupan City BAGUIO CITY: All Flip-Flops Patria de Baguio EXT., Session Road Baguio City (074)442-5712 High Tide Store Special Economic Zone, Camp John Hay Baguio City (074)4460886 LAOAG: Red Dot Boutique 72 F.R. Castro Ave. Laoag City, Ilocos Norte (077) 771-1437 LA UNION: San Juan Surf Shop San Juan Surf Resort, Urbiztondo San Juan, La Union (072)720-0340 PAMPANGA: All Flip-Flops Lot 1 Robinsons Star Mills O.G. Rd San Fernando, Pampanga (046)636-3565 LAGUNA: All Flip-Flops Paseo de Sta. Rosa, Sta. Rosa, Laguna (049)541-2087, 0916-331-8623 Fashion Outlet Sta. Rosa, Laguna (049)541-2087 SUBIC: Royal Subic Duty Free 1109 Palm St., Subic Bay Freeport Zone Olongapo City 0917-521-5141 VIGAN: Red Dot Boutique Syquia Bldg. cor. Men Crisolog St. Heritage Village. Vigan City, Ilocos Sur. (077) 632-1168 TUGUEGARAO: Red Dot Boutique 16 College Avenue, Tuguegarao City

SOUTHERN LUZON BATANGAS: All Flip-Flops G/F SM City Batangas, 194 Pallocan West Pastor Village, Batangas City (043)783-0454 All Flip-Flops G/F SM City Lipa, Ayala Highway Lipa City, Batangas (043)757-4074 H Kape Maharlika Highway, Lipa City, Batangas (043)312-6289

BICOL: All Flip-Flops G/F SM City Naga, Central Business District, 2 Triangulo, Naga City (054)495-5055 Evolution Salon and Day Spa G/F Villa Caceres Hotel, Magsaysay Ave., Naga City (054)811-1192 Soleil et Lune 2/F Avenue Square, Magsaysay Ave., Naga City (054)473-6611 Wardrobe and Me 3/F E-Mall, Elias Angeles St., Naga City F2M Pacific Mall, Legaspi City, Albay (052)480-0828 Hotel Venezia Renaissance Gardens, Washington Drive, Legaspi City, Albay (052) 481-0877

QUEZON PROVINCE: Mug Cafe Pacific Mall, Lucena, Quezon (042)660-4200 BORACAY All Flip-Flops by the Beach Station 1, Balabag, Boracay Islang, Malay, Aklan (036)288-1544 (036)288-1545 Fridays Resort Panglao Island, Bingag, Dauis, Bohol (036)288-6200 Latte Sta. Monica, Andagao, Kalibo, Aklan (036)268-9026 (036)268-6000 Nami Resort Diniwid Beach, Boracay Island, Malay, Aklan (036)288-6753 (036)288-6754 Discovery Shores Station 1, Boracay Island, Malay, Aklan (036)288-4500 Waling-Waling Station 1, Balabag, Boracay Island, Malay, Aklan

(036)288-5556 (036)288-5557 Regalo Boutique Shangri-las Boracay Resort and Spa, Barangay Yapak, Boracay Island (036)288-4988 CENTRAL AND EASTERN VISAYAS CEBU: All Flip-Flops G/F North Wing, SM City Cebu North Reclamation Area, Cebu City (032)236-0985 All Flip-Flops G/F Paseo Ciudad, Ayala Center Cebu Cebu City July 2/F Ayala Center Cebu, Archbishop Reyes St. Cebu City (032)412-5724 Republik G/F Banilad Town Center, Gov. M. Cuenco Ave. Banilad, Cebu City (032)231-5641 What A Girl Wants 2/F Ayala Center Cebu, Archbishop Reyes St. Cebu City (032)415-6136 Rustans G/F Level 1, Ayala Center Cebu, Archbishop Reyes St., Cebu City (032)231-5641 Meddah Spa CrossRoads, Banilad, Cebu City DUMAGUETE: Hayahay 211 Flores Ave., Piapi Beach, Dumaguete City MACTAN: Abaca Boutique Hotel Abaca Boutique Hotel, Punta Engano, Mactan (032)495-3461 Maribago Bluewater Beach Resort Maribago Blue Waters Resort Gift Shop Maribago, Mactan (032)492-0100 Plantation Bay Resort and Spa Plantation Bay Resort & Spa Dive Shop Marigondon, Mactan (032)340-5900

TACLOBAN: 7R Store Salazar St., Tacloban City, Leyte WESTERN VISAYAS BACOLOD: Learning Gallery G/F Lourdes Center, Lacson St., Bacolod City (034)423-2699 Pink Elephant G/F Parking Annex Bldg., Lopues East Center Carlos Hilado National Highway, Bacolod City (034)433-9280 Seed 2/F Robinsons Place Bacolod, Mandalagan Bacolod City Carlos Hilado National Highway, Bacolod City (034)441-0558 ILOILO: All Flip-Flops LG/F SM City Iloilo, Sen. Benigno Aquino Jr. Ave. Mandurriao, Iloilo City (033)329-2346 Seed G/F Robinsons Place Iloilo Iloilo City NORTHERN AND WESTERN MINDANAO BUTUAN CITY: Cirrus Lifestyle Haven 1342 Sentro Bldg., JC Aquino St., Butuan City (085)815-5264 CAGAYAN DE ORO: All Flip-Flops SM City CDO, Materson Ave. cor. Gran Via St. Cagayan de Oro City, Misamis Oriental (088)859-2335 Ban Sabai Traditional Thai Massage Corrales Ave. Cor Ramon Chaves St. Cagayan de Oro City, Misamis Oriental (08822)714-032 Gazebo A. Velez St. corner Gaerlan St. Cagayan de Oro City, Misamis Oriental 088-857-4667 Mallberry Suites Business Hotel Florentino St., Limketkai Center, Cagayan de Oro City, Misamis Oriental (088)854-9999/ (08822)72-4999 Spruce 2/F Limketkai Center, Rosario St. Cagayan de Oro City, Misamis Oriental (088)856-2234

ORMOC CITY: Tshillys G/F Ormoc Villa Hotel, Obrero St., Ormoc City BOHOL: Panglao Island Nature Resort Pangloa Island Bingag, Dauis, Bohol (038)411-2599 Amorita Resort Easter A. Lim Drive, Brgy. Tawala, Pangloa, Bohol

DIPOLOG CITY: Myx Boutique General Luna St. cor.Ortega St., Dipolog City ILIGAN CITY: Shelves & Hangers

Juan Luna St., Iligan City, Lanao del Norte (063)223-2652 Street Shop Quezon Avenue Extension, Iligan City Lanao del Norte (063)221-6335 MARAWI CITY: My Tiny Closet Panggao, Saduc, Marawi City OZAMIZ CITY: Spruce G/F Medina Bldg, Gallardo St. Ozamiz City 088-5215982 SURIGAO CITY: Pieces of a Dream Stall No. 6 City Commercial Bldg., Borromeo St., Surigao City ZAMBOANGA CITY: The Sidewalk 3/F Southway Sq., Gov. Lim Ave., Zamboanga City SOUTHERN AND EASTERN MINDANAO COTABATO CITY: Bajunaid 20 Biruar Bldg., Bonifacio St., Cotabato City (0917)708-1889 DAVAO: All Flip-Flops SM City Davao, Quimpo Blvd. cor. Tulip Dr., Ecoland Subdivision, Brgy. Matina, Davao City (082)282-0977 Apo View Hotel G/F 1510 J. Camus St., Davao City (082)221-6430 Bliss Salon and Day Spa G/F Lanco Corporate Center, J.P. Laurel Avenue Davao City (082)225-5677 Chimes Specialty Store Sales St. (0918)942-4639 Choo Choo Baby G/F Gaisano Mall, J.P. Laurel Ave., Davao City (0918)910-3079 Jill & Co. G/F Victoria Plaza Mall, J.P. Laurel Ave., Bajada, Davao City (0917)717-0885 Martish Store Villa Margarita Hotel, J.P. Laurel Ave., Davao City (082)221-5674 Sunlab 2/F Gaisano Mall, J.P. Laurel Ave., Davao City (082)305-2902

(0926)447-5357 SAMAL ISLAND: Pearl Farm Boutique Pearl Farm, Kaputian District, Island Garden, City of Samal (0920)917-1640

KORONADAL CITY: Mia Lees Boutique

Promotions In the Philippines, there are no television and radio advertisements for Havaianas. Most of the promotions are done through print ads in various magazines and events that they host and sponsor. Every year, theres the Make Your Own Havaianas event where Havaianaticos, avid users of the brand, can customized their own pair of flip flops. They also had Havaianas Playback that relieved Filipino street games. Havaianas is also effective in creating a bandwagon to promote the use of its slippers. Names of famous celebrities who are spotted wearing them are being spread, particularly through word of mouth and their actual pictures. Moreover, they make use of their website, mailing lists and various fanbase sites so they can interact and keep in touch with their customers. As to how successful are they in promoting the brand, the long lines to their stores who even needed bouncers and velvet ropes to control the crowd are just enough proof.

Competitive Strategies Employed According to Anne Arcenas-Gonzales, managing director of Terry S.A., they at Havaianas are not worried with the current deluge of competition. They even see this as an advantage since it brought more attention to the industry as a whole. Furthermore, even if theres a lot of variety to choose from now, they are banking on the brands popularity and superior quality that will make the consumers still choose them over the others. Rather, what threatens them more are the existence

of imitations and the availability of the same products sourced via parallel importation. With this, they are planning to release 20 to 25 new styles every two months to encourage more buyers. They also try to find out what their customers want in their Havaianas and make them closer to their hearts. Just recently, they added a Pinoy touch to its flip flops with a theme Put some Pinoy soul into your step. Whatever changes and makeovers Havaianas undergoes, they assure that the flexibility, grip, and comfort that has made Havaianas not just a flimsy fashion trend but a dependable and durable footwear essential that will last for years to come will be constant no matter what. Moreover, they have been establishing a loyal group of consumers that they even organize parties for them as a way of giving back. Also, people who are subscribed in their mailing lists get the privilege of being informed with their promos and events first. III. Identified Market Opportunity The Philippines have shown to be a country with changing lifestyles given the increasing awareness with health and fitness opportunities. Add to that, the Philippines has presented itself to be a venue wherein beaches have been local hotspots especially for the young adults generation. Yet, the beach has also been shifting its image from being just a vacation destination to being a pleasure haven for water sports as well. Since women have been marrying at later ages and prioritizing their careers, there is an increase of value for their own needs and wants. Women in general are known to be big spenders of footwear since they equate it as their necessities or pleasure items. In fact, shoes are just some of their rewards for themselves. With their increasing incomes, they become more gracious of spending for things other than their daily basic necessities. They have also developed different types of

leisure activities so as to compensate with their stressful lives such as the pursuit of fitness. Essentially, Filipino females have been an emerging sector with an

increasing consciousness for fitness. Moreover, they have also become more adventurous in trying out sports that would usually be ventured out by males like water sports. Given the increasing popularity of such activities, Filipino females generate a higher demand for goods that would complement and aid them with such endeavors especially goods such as footwear particularly water shoes. As of now, market leaders Nike, Adidas and Speedo have been the brands known to consumers to provide water shoes that would precisely answer athletic needs. Havaianas, Sanuk, and Crocs are the brands consumers go to for a more casual yet fashionable choice of beach footwear. Still, Nike, Adidas and Speedo present itself as more of a functional product. On the other hand, Havaianas, Sanuk and Crocs just pose themselves as comfortable and stylish footwear without meeting actual sports related needs, in this case, water sports.

Nikole, age 29, is on a company trip at Boracay. She wants to try riding the Banana Boat. However, Nikole is worried that she might lose the flip-flops that she is wearing and if she uses her sneakers, shes afraid that it might get ruined when she gets thrown off the banana boat. Sandra, age 25, is in Puerto Galera during the Christmas holidays. As she is swimming on the beach, she noticed that there are sea urchins on the waterbed. Afraid of stepping on one, she decides to wear her flipflops to the water. Oh no! Her flip-flops floated on the water. She ended up going bare foot. The next day, she borrowed her friends flip-flops that had a strap. Confident of the slippers, she started swimming and walking in the water. When she reached the corals, she stubbed her toe on one of them. Angeli, age 13, is in Palawan with her family for a vacation. Although she likes the ocean, she doesnt like the scorching hot sand. Even while wearing her flip-flops, she can still feel the hot sand going in between her toes giving her rashes. Ella, age 19, owns a pair of aqua shoes. She knows of the shoes benefits and uses, and thinks that it is practical for wearing in the beach. However, she noticed, her aqua shoes doesnt go with her bikini, summer dress, and other beach wear. Also, the designs available in stores for the

With these various selections in the footwear market today, many females still have concerns regarding the footwear that would best adjust to their lifestyles at the beach.

The modern active Filipina, most especially young adults and teenagers, continues to have fashion and personal style as her prevailing major factors in footwear purchasing decisions. Nevertheless, she needs more than the usual footwear that would provide her with the standard comfort and style. In pursuing her active lifestyle at the beach, she also needs footwear that would deliver optimum performance. She is faced with compromising function with style. Havaianas Aqua jumps on the opportunity of delivering the balance of both for the modern active Filipina. Since Havaianas has established itself as a brand known for its comfortable and fashionable footwear not only for the beach but for other casual occasions as well, it differentiates itself away from only catering to athletes. As other sports brands have been focusing on promoting itself as an athlete brand, Havaianas has posed itself as brand for everyone who has sense for the trendy and the efficient. Although Nike, Adidas and Speedo have focused more on the athletic needs of women, they have not established themselves so much as a go-to for the fashion concerns of women. Havaianas shows as a friendlier choice for females who are not that keen with sports in general. Given this, a wider range of women of different personalities would be more in touch with Havaianas Aqua. Add to that, Havaianas Aqua directly wants to address the fashion needs of women who engage in water sports. It also introduces aqua shoes as another alternative for casual beach

footwear. Moreover, with Havaianas being popular for its quality and fresh colorful designs, it proves to be an ideal brand for the fashion-conscious and the brandconscious. V. Proposed Target Market A. Demographics

POPULATION CIVIL STATUS SOCIAL STATUS EDUCATION AGE

Female Preferably Single Middle-Income to High-Income Private Schooling 13-29

The proposed target market is the female population in the Philippines. From there, Havaianas Aqua will be targeting those females aged 13-29, considered to be teenagers and yuppies. As for the social status, Havaianas Aqua will be targeting those belonging in the middle class and in the high class. It would also target single women since they have more tendencies to be more active than those who are married a factor that that we highly regard in advertising our product. The proposed product can be pricy for most consumers so Havaianas Aqua will only target those with higher income. Since it is targeting the middle-income class and the high-income class, the group assumes that these females are currently studying or have experienced private schooling. Also, it can be assumed that students from exclusive schools are more exposed to our company and the line of products it offers. The proposed target geographical segment is expected to hold the highest average annual family income and expenditure, and among all the regions based on our research, it is NCR.

Region Average Income PHILIPPINES NCR CAR Ilocos Cagayan Valley Central Luzon Southern Tagalog Bicol

2003 Average Expenditur e 124,000 218,000 Average Income

2006 Average Expenditur e 147,180 257,930

148,000 266,0 00 152,0 00 124,0 00 126,0 00 160,0 00 184,0 00 103,0 00

172,730 310,860 192,1

126,000 102,000 99,000 138,000 158,000 84,000

26 142,3 58 142,7 70 197,6 40 209,7 49 108,9 46

150,508 123,502 117,889 170,347 186,287 92,999

Average Annual Family Income and Expenditure by Region 1997 to 2006 (in PhP) Region 1997 Average Average Income Expenditure 123,168 270,993 112,361 102,597 86,822 133,130 132,363 77,132 99,537 217,840 86,924 83,307 68,556 105,558 104,002 67,012 2000 Average Average Income Expenditure 144,039 300,304 139,613 120,898 108,427 151,449 161,963 89,227 118,002 244,240 110,338 95,755 88,655 120,003 135,043 77,287

PHILIPPINES NCR CAR Ilocos Cagayan Valley Central Luzon Southern Tagalog Bicol

Source: National Statistics Office

The middle-income class could be defined as those families with annual income ranging from P148,307 to P1,207,122 in 1997; P178,468 to P1,449,295 in 2000; and P203,109 to P1,651,632 in 2003. For 2007, the range should be from P251,283 to P2,045,280. Source: Trends and Characteristics of the Middle -Income Class in the Philippines: Is it Expanding or Shrinking? By Romulo A. Virola, Mildred B. Addawe and Ma. Ivy T. Querubin Basically, based from research, urban women with higher education belonging to a higher economic status delay marriage. Therefore, Havaianas Aqua is planning to target those who are single because of the more opportunities given for them to be more active in activities, like particularly in our case, water sports activities, going to different beaches and other aquatic activities. Median Age at First Marriage by Background Characteristic BACKGROUND CHARACTERISTIC RESIDENCE Urban Rural REGION NCR CAR I II III IV 1993 1998 2003

22.3 20.7 24.0 22.3 22.2 20.4 21.5 21.4

23.0 21.0 24.0 24.0 21.9 20.3 22.1 22.1

22.9 20.9 23.8 21.5 22.1 20.9 22.1

IVA IVB V EDUCATION No Education Elementary High School College or higher WEALTH INDEX QUINTILE Lowest Second Middle Fourth Highest TOTAL

20.8 18.9 19.6 21.1 a

21.5 18.7 19.8 21.5 a

22.7 21.0 21.4 18.2 19.6 21.2 a

21.4

22.1

19.7 20.6 21.5 22.8 24.6 22.0

a - omitted because less than 50 percent of women married for the first time before reaching age 25 Source: National Demographic and Health Survey: 1993, 1998 and 2003 Another component in the proposed target market is the age group which we Havaianas Aqua is advertising to. The group is planning to focus on teenage girls and female yuppies or female young adults, aged 13-29. Younger generations and young adults during their leisure time tend to participate more in different sports activities since they are more active and are usually more physically-capable to do different kinds of activities. The proposed product caters to water sports enthusiasts or those active in going to different beaches to enjoy different aquatic activities. The group assumes that more consumers will be coming from this age range because of the number of activities that they do and the higher amount of activeness that they give. A huge factor in the target market is the proposed target gender, which are females. Since our product, Havaianas Aqua, focuses on functionality and design, the group believes that women could be the best market

to cater to. It is functional for women because Havaianas Aqua would enhance the comfort and ensure safety of the feet in aquatic environments. Women tend to be more careful of their feet so that it would not get cut, bruised or even smell bad. For design, women are more attracted to the vibrant colors and images that would very well relate to our companys advertisements. Also, the companys advertisements are much seen on fashion magazines that are usually read by women. The product would also focus on the design to adhere to the companys trend of creating fashion statements through footwear. Basically, the different concepts of Havaianas Aqua would draw more attention to the female population rather than the male population. 5-Year Interval Population Year Both Sexes 2000 76,504,077 2005 85,261,000 Source: National Statistics Office MALE 38,524,267 42,887,300 FEMALE 37,979,810 42,373,700

Population by Age Group, by Sex and by Region: 2000 (proposed target age) Age Group Both Sexes 10-14 8,949,614 15-19 8,017,298 20-24 7,069,403 25-29 6,071,089 Source: National Statistics Office B. Psychographics Male 4,541,197 4,017,830 3,522,518 3,053,616 Female 4,408,417 3,999,468 3,546,885 3,017,473

Social Class Age Group Activities

Class A & B Teenagers and People in their 20s Studying (School), Working (Office), Going out for social gatherings and events, Social networking,

Interests

Shopping, Sports Activities, Out of town trips Latest fashion trends, Sports, Travelling, Leisure and

Opinions

Recreation Being fashionable is cool, I want to be in the trend, I should get the most out of my money, I have to look and feel good, I want to have fun and

Personality Characteristics

just be carefree Wants to be in, Fashion-forward, Practical, Modern, Active, Fun-loving, Sociable, Strong decision and purchasing power

Havaianas Aqua particularly targets female teenagers to young professionals of Class A & B. They are those who seem to afford having a work-leisure balance in their lifestyle. They can be really busy with school or work but they still find time to have fun and a bit of rest and relaxation once in a while. They go to the mall, party with their friends, do sports and even go out of town especially during long weekend holidays. They are active and fun-loving. These people are also the ones who have tendencies to follow trends as they feel the need to be sociable. Psychology says that within this age range that people strive to look for their own identity and a certain group they can belong to. Moreover, these people have a strong decision and purchasing power so they can go buy almost anything they want. Though teenagers still get their money from their parents, they relatively have full freedom with their purchases. Young professionals, on the other hand, do not have much responsibilities to pay for so they still can spend their earned money for their own whims. The group then see that these people are the ones most likely to buy and actually use Havaianas Aqua. As they go to the beaches of nearby towns and provinces, they can wear these aqua shoes and totally enjoy the water as they

would not bother about their feet getting hurt from the rocky and slippery surfaces. They can be completely carefree and just have the fun they want. Furthermore, they can wear these ultra fashionable aqua shoes to match their equally stylish swimsuits. Havaianas Aqua would surely be a perfect fit for chic and trendy girls who just love to have fun. C. Behavioral

Occasion Benefits Sought User Status User Rates Brand Loyalty

Beach Trips, Water Sports Activities Quality, Comfort, Function, Added Protection, Fashion, Trend, Social Status, Antibacterial Feature Potential User / First Time User Heavy User Hard Core Loyals (buy all the Havaianas products of every design and color always/most often) Soft Core Loyals (buy one or two pairs of Havaianas always/most

Loyalty Status Readiness Stage Attitudes Toward Product

often) Absolute / Strong Interested Positive, Enthusiastic, Interested

Even though the need for aqua shoes would probably arise during Summer, Havaianas Aqua places itself as a product for any season. Essentially, Havaianas Aqua is a key footwear item for beach trips since this is the primary setting for this product. However, it also acknowledges an arising need for this footwear not only in beach settings but also in other settings where water sports may be carried out.

Add to that, Havaianas Aqua also presents itself as a need for those who regularly go to the beach or those who regularly engage in water sports. Females, being generally fashion-conscious, go for athletic footwear that would offer both function and style. Following the trends become vital for females since this translates what the mass population believes as fashionable. Moreover, many females choose their brand of footwear based on its prestige and popularity since this would equate to social status and quality. With their increasing awareness of developments of new technology, comfort, protection and other plus features have become more of a clincher for footwear purchasing decisions. Havaianas Aqua aims to nail down the market of those who seek or are not even aware of these benefits. Havaianas Aqua intends to tap further into Havaianas already existing strong cult following. It presents itself as another choice to satisfy any other concerns that they might have from their regular flip flops. D. Geographic

Country Region Cities

Philippines National Capital Region (NCR) Manila, Mandaluyong, Marikina, Pasig, Quezon, San Juan, Malabon, Navotas, Valenzuela, Las Pias, Makati,

City or Metro Size Population Density Climate

Muntinlupa, Paraaque, Pasay, Taguig 636 sq. km. 15,617 per sq. km. Tropical Climate

The proposed geographic segment for Havaianas Aqua is the Philippines, specifically the National Capital Region (NCR). The National Capital Regions cities

are Highly Urbanized, with 1st class income classification as described by NSCB. NCR is also the center for Philippine commerce and includes the cities of Manila, Mandaluyong, Marikina, Pasig, Quezon, San Juan, Malabon, Navotas, Valenzuela, Las Pias, Makati, Muntinlupa, Paraaque, Pasay, and Taguig.

City CITY OF MANILA CITY OF MANDALUYONG CITY OF MARIKINA CITY OF PASIG QUEZON CITY CITY OF SAN JUAN CALOOCAN CITY CITY OF MALABON CITY OF NAVOTAS CITY OF VALENZUELA CITY OF LAS PIAS CITY OF MAKATI CITY OF MUNTINLUPA CITY OF PARAAQUE PASAY CITY TAGUIG CITY

Province NCR, CITY OF MANILA, FIRST DISTRICT NCR, SECOND DISTRICT NCR, SECOND DISTRICT NCR, SECOND DISTRICT NCR, SECOND DISTRICT NCR, SECOND DISTRICT NCR, THIRD DISTRICT NCR, THIRD DISTRICT NCR, THIRD DISTRICT NCR, THIRD DISTRICT NCR, FOURTH DISTRICT NCR, FOURTH DISTRICT NCR, FOURTH DISTRICT NCR, FOURTH DISTRICT NCR, FOURTH DISTRICT NCR, FOURTH DISTRICT

City Class Highly Urbanized Highly Urbanized Highly Urbanized Highly Urbanized Highly Urbanized Highly Urbanized Highly Urbanized Highly Urbanized Highly Urbanized Highly Urbanized Highly Urbanized Highly Urbanized Highly Urbanized Highly Urbanized Highly Urbanized Highly Urbanized

Income Class Special 1st Class 1st Class 1st Class Special 1st Class 1st Class 1st Class 1st Class 1st Class 1st Class 1st Class 1st Class 1st Class 1st Class 1st Class

Source: National Statistical Coordination Board The Philippines is an ideal market for Havaianas Aqua because of its long summers and the presence of many beaches. The National Capital Region is ideal for the proposed target market because all of its cities are urbanized and has total population of more than 9 million. NCR also has an annual growth rate of

2.25% and has around 2,132,989 households. National Capital Region (2000) Total Population 9,932,560 Ave. Annual Growth Rates 2.25% (1990-2000) No. of Households 2,132,989 Average Household Size 4.62 Land Area 636 sq. km. Population Density 15,617 per sq. km. No. of City / Municipality 16 No. of Barangays 1,694 Source: 2000 Census of Population VI. Marketing Objectives A. Overall Marketing Objectives Havaianas Aqua aims to introduce aqua shoes as part of the Havaianas brand. Aside from flip-flops, the Havaianas brand is well known for beach and

casual footwear that is both durable and comfortable. Taking advantage of this, the group aims to take part in the athletic footwear industry that provides aqua shoes. The goal of Havaianas aqua for the next 3 years is to establish aqua shoes as a staple beach casual wear for women ages 13- 29. In terms of sales, the group expects the aqua shoes to be profitable and have a increase in sales by the end of the third year. Havaianas is already a well known and established brand in the Philippines. With the introduction of Havaianas Aqua,

Havaianas will add to their already existing market and have more than flip-flop customers as their regular clientele. The current competitions for aqua shoes, Nike, Adidas, and Speedo, are not very aggressive in terms of advertising their aqua shoes line. On the other hand, Havaianas aqua will stick with Havaianass current promotion strategy and will offer the brand to the cities of the National Capital Region: Manila, Mandaluyong, Marikina, Pasig, Quezon, San Juan, Malabon, Navotas, Valenzuela, Las Pias, Makati, Muntinlupa, Paraaque, Pasay, and Taguig. Objectively, for the first 2 years, Havaianas Aqua will focus on establishing the product. For the third year, the group expects that Havaianas Aqua will be picked up by the Philippine market and thus, the company can start distributing the brand to other urbanized cities in the country. B. Specific Objectives and Targets (3 years)

Market Share Sales Profit Distribution

2010 0.2% * Php 873,602,650.96 Php 221,687,013.08 SM, Robinsons, Ayala Malls, Powerplant

2011 0.2% * Php 889,501,813.30 Php 221,751,277.70 SM, Robinsons, Ayala Malls, Powerplant NCR

2012 0.2% * Php 905,682,855.69 Php 206,189,748.74 SM, Robinsons, Ayala Malls, Powerplant, Local malls in provinces NCR, Cebu, Palawan

Area

NCR

*Based on Terry S.A. Inc. (Havainas Philippines)

Based on the Terry S.A. Inc. income statement for year December 31, 2008, sales reached Php205,018,894 for 2007 and Php231,337485 for 2008. Comparing to Nikes 2008 sales and market share on clothing and footwear retailers of Php2,000,000,000 and 2.2% respectively, we have established the market share of Havainas Philippines, which is 0.2%. For the next 3 years, we are expecting the company to maintain its market share of 0.2%. The group is proposing to sell the aqua shoes for Php 1,699 for solid colored aqua shoes and P1,999 for printed aqua shoes, so the median price is about Php 1,849. Based on our survey, 60.98% of the target market size is willing to buy Havaianas Aqua. The target market size for 2010, 2011 and 2012 are 774,800, 788,901 and 803,252 people respectively. So given the percent of buyers, target population and the median price, the group developed an objective sales growth for 2010-2012. There is also a computed cost given the expected cost of sales, operating expense and advertising expense. Therefore, there is a developed income for the next 3 years. For the next two years, Havainas Aqua will be focusing on retail stores in NCR, specifically at malls where a big number of people go to and also we will focus on high-end malls. For 2012, Havaianas Aqua will be selling at local malls in the provinces. As for area, the focused target area is NCR since all the factors the group is considering for the proposed target market is found mostly from people located in NCR. For 2012, the company will be expanding its network to Cebu and Palawan since they have many islands and beaches that tourists go to. Cebu and Palawan are also considered as highly urbanized areas. Basically, Havainas Aqua is promoting casual beach footwear that is both durable and comfortable. Havainas, our company, will sell these aqua shoes with

variations of design every season, just like what they normally do with their flip flops. Havainas Aqua will be distributing to selective areas only, mainly high-end and highly-urbanized markets. The group also expects the loyal consumers of Havaianas to still support the proposed product, but it will be attracting new users as well. As for advertising strategies, the group will continue with what Havainas is doing right now through word of mouth, sponsoring events and magazine advertisements. VII. Overall Marketing Strategy To active and fashion-forward teenagers and young professionals who frequently go to the beach and engage in water activities, Havaianas Aqua is the aqua shoes that will give the right covering and protection for your feet while keeping you chic and trendy. With Havaianas Aqua, you can walk, swim and play on the beach confidently, safely and in style.

The aqua shoes that are currently available in the market seem to be primarily targeted for water sports enthusiasts who of course need much protection. These shoes normally just come in plain colors with barely any design at all. They are just but aqua shoes. Though the athletes may not be really concerned with the shoes overall look, they are not just the ones who need aqua shoes to protect their feet. Practically everyone who goes to the beach need them including people who are very much concerned with how fashionably they look like. Havaianas is particularly known for its colorful and vibrant trendy flipflops and so is how the aqua shoes would look like. Unlike the usual aqua shoes, Havaianas Aqua would be offered in a diverse range of styles, prints and colors so as to cater to the varying preferences of people. They would be made through the

powerful combination of the authentic premium Havaianas rubber and a special kind of fabric that will surely ensure comfort, warmth and protection for ones feet. The soles would be hard enough on the outside for extreme protection but would be very soft inside for greater comfort. They could also have removable straps for flexibility of the users preferences and the products functionality. Being very chic and trendy, we want people not to just wear Havaianas Aqua on the beach but even on normal days as well. They could indeed be very reliable especially during the rainy season. As for the packaging, they would come in a clear transparent plastic box so people can readily see them with their fabulous designs that are absolutely worth noticing. There would also be a shoe bag so users can conveniently bring them to the beach or wherever.

Promotion-wise, Havaianas Aqua will stick with the current strategies of the brand. Advertisements would be placed in teens, young women, fashion, travel and sports magazines. They could also sponsor school fairs and parties and even water sports competitions and events. The brand will reach out to our prospected customers by being involved with the events their customers go to and products or media that they use, still no television or radio ads. Hopefully, the shoe line would still be made known by word of mouth or even through bandwagon as celebrities and the high end populace wear them. Such people are known to sport branded

clothing and footwear and since Havaianas is a popular high end flipflop brand, they are likely to try them on and influence more people. So as not to be far from competition, Havaianas Aqua would be sold for Php1499 to Php1999 depending on its style and design the simpler and not printed ones for Php1499, the printed and more colorful for Php1699 and the special and limited seasonal designs for Php1999. They may be indeed quite pricey but they would surely be worth all your cents being the fashionable and reliable aqua shoes that they are. These aqua shoes would still be distributed by Havaianas main distributor in the Philippines, Terry S.A. Inc. and would be sold in all the Havaianas retailers in the country. For the flagship and other big stores like All Flip Flops in Bonifacio High Street, Havaianas Aqua would have an accent wall of beach background. Such wall would have floating shelves displaying the current styles of the shoe line. For all the others where Havaianas is just consigned, Havaianas Aqua would be displayed in racks or maybe even a small wall, depending on the stores policies and arrangements.

VIII. The Marketing Mix 1. Product Figure 3.1.1. Logo

The Havaianas aqua shoes product name will be Havaianas Aqua. As with previous Havaianas products, the brand name is followed by the product design name. The logo, as shown in Figure 1, shows the Havaianas brand name and the product design name, Aqua, in a wavy script. a. Product Strategy / Positioning

To active and fashion-forward teenagers and young professionals who frequently go to the beach and engage in water activities, Havaianas Aqua is the aqua shoes that will give the right covering and protection for your feet while keeping you chic and trendy. With Havaianas Aqua, you can walk, swim and play on the beach confidently, safely and in style.

The scorching hot sand, slippery and rocky surfaces, as well as strong waves in the beach often prove to be a problem for womens footwear. For the modern woman, these problems may be solved by aqua shoes. However, the styles and colors available are unable to suit their tastes. Havaianas Aqua shoes give women aged 13-29, a more fashionable alternative to the current aqua shoes available in the market today. It gives their foot proper protection but with style and comfort.

b. i.

Product Description / Features / USP Product Description

The Havaianas brand is known for its colourful and vibrant flip-flops. The brand represents three Fs: Fashion, Function, and Fun. The Havaianas brand is not limited to the beach or swimming pool. They are versatile and can be worn on different occasions. Havaianas Aqua comes in seven different styles and ten colors. Each style comes in solid colors and both solid colors with printed patterns. These styles are comfortable, durable, versatile, and stylish. They are made of sports mesh fabric, microfiber nylon fabric, neoprene, rubber outsoles and insoles. The sports mesh provides a breathable and cool feeling for the feet. The microfiber nylon fabric gives the aqua shoes the flexibility it needs. The neoprene fabric is commonly used for wetsuits in scuba diving and wading boots for fishermen for its warming effect. Medical support braces also use neoprene. (See appendix for Neoprene Color Chart)

Havaianas Aqua Coast Solid and/or

Printed Garter strap to

hold the shoe in place Available in 10

colors

Havaianas Aqua Pearl Solid colors:

white, pink, black

Havaianas Aqua Breeze Solid and/or

Printed Cool breathable

design Shoe loop for

easy clothesline hanging

Available in 10

colors Havaianas Aqua Cabana 2-tone colors Cool breathable

design

Havaianas Aqua Coral Solid and/or

Printed

Havaianas Aqua Stream Solid and/or

Printed Diagonal garter

strap

Havaianas Aqua Shore Solid and/or

Printed Criss-cross

garter design Shoe loop for

easy clothesline hanging Havaianas Aqua will follow Havaianass current range of sizes. Its smallest size in US size is 3 and its largest is size 10. Brazil Women 33/4 35/6 37/8 39/0 41/2 US 3 4/5 6/7 8/9 10

ii.

Features

Havaianas Aqua are aqua shoes that gives its users feet protection while keeping them chic and trendy, not compromising their style. Havaianas Aqua is still stylish and versatile enough to be used even when not on the beach. It features 10 different colors: red, yellow, green, blue, orange, violet, brown, black, white, and gray. Havaianas Aquas insoles are equipped with anti-bacterial properties that will keep bacteria that causes odor to accumulate. It is also very soft to provide comfort to the users feet. The shoes rubber outsoles on the other hand, is hard enough on the outside for maximum protection.

iii.

Unique Selling Proposition Compared to other brands like Nike, Adidas, and Speedo; Havaianas Aquas shoes offers style, comfort, protection, and durability to its users. Though concentrating more on style, Havaianas Aqua does not compromise the athletic aspect of aqua shoes and presents adequate qualities similar to those of well-known aqua shoes brands. Havaianas will prove to be Fashionable yet reliable aqua shoes.

c.

Packaging

Every Havaianas Aqua shoe will come with the tag shown in Figure 3.1. The tag has a black base color similar to the original Havaianas slippers tag. Its made out of matted carton paper and it will feature the aqua shoes style name, size, and seal of authenticity.

Figure 3.1.2. Shoe Tag

Front

Back

The Seal of Authenticity is the quality assurance that Havaianas provides to its consumers that what theyre buying is genuine Havaianas. It also assures the buyer that the product is imported and made from Brazil.

Figure 3.1.3.

Style name

Logo

Figure 3.1.4.

Size

Seal of Authenticit y

Havaianas Aqua would come in a clear plastic box (Figure 2) to emphasize the shoes colourful design. The clear plastic box also represents water, which coincides with the primary function of aqua shoes. The boxs length is 3.5 in x 10.75 in and has a width of 5 inches. Havaianas Aqua will not only come in a clear box, but also in a shoe bag so it can be conveniently brought anywhere. The shoe bag is made of nylon fabric in a shade of blue and designed with different sizes of circles forming a sun with the Havaianas Aqua logo at its center. (See Figure 3.1.4.)

Figure 3.1.2.

3.5 in

5 in

10.75 in Figure 3.1.3.

Figure 3.1.4. Shoe Bag

12 in

9 in 2. Pricing a. Pricing Strategy Our group will mainly use value-based pricing and pricing strategies based on competitors. Our group will focus on good-value pricing strategies as our product offers a fair price for both good quality and service. Also, value-added pricing will be

used as our product offers added features with corresponding charging of higher prices. A pair of Havaianas Aqua will have a suggested retail price of Php 1,699.00 for shoes with solid color designs and Php 1,999.00 for shoes with printed designs. The prices of shoes with garters do not differ from those without since the cost of the garter is only minimal. Compared to our competitors, Havaianas Aqua offers a fair price, not the cheapest, but not the most expensive as well. The prices we have set only range from Php 1,000-2000 since based the survey we have conducted, 88% of the respondents are willing to spend only Php 1,0002,000 for aqua shoes and 83% of the respondents are also willing to spend only Php 1,000-2,000 for Havaianas Aqua. The prices set are also cheaper compared to most of our competitors since Havaianas Aqua is neither specifically athletic shoes nor specifically casual shoes. Our proposed product is mainly casual shoes bordering athletic, so it doesnt serve a specific purpose unlike for example Speedo which best serves swimmers or athletes, thus having a more expensive price since they offer special technology in their water shoes for the athletes. Havaianas Aqua shoes with printed designs are set with higher prices since it offers a variety of patterns and designs which customers can choose from. Havaianas, our main company, has an existing pricing strategy of charging higher prices for printed designs of flip flops, thus our group plans to follow this kind of strategy of setting higher prices for shoes with printed designs compared to those shoes which have solid color designs only.

These prices are priced fairly since Havaianas Aqua has a good quality given that our group would be using materials that are already guaranteed to have best features, like the Havainas rubber formulated to have extreme comfort and durability. Even if the demand for aqua shoes is low, our group depends on the existing loyalty and support of customers with the trusted brand of our company. Also, based on our survey, most of our correspondents are willing to try out Havainas Aqua due to the trusted brand and quality of products that our company offers, which mainly gives us enough reason to set a fairly high price for our proposed product. There would be a standard suggested retail price for all stores. Retail price (solid colors): Php 1,699.00 Retail price (printed): Php 1,999.00

b. Detailed Product Costing MATERIAL Rubber Outsoles Insoles Sports Mesh Fabric per foot Microfiber Nylon Fabric per sq.foot Neoprene per sq.foot Nylon Lycra for the strap per 3inches TOTAL MATERIAL COST COST Materials Packaging (clear plastic box) Cost of Production TOTAL PRODUCT COST COST (a pair of aqua shoes) Php 61.63 Php 96.00 Php 128.16 Php 60.00 Php 411.36 Php 35.40 Php 792.55 HAVAIANAS AQUA (pair) Php 792.55 Php 239.52 Php 100.00 Php 1,132.07

The cost of the specialized synthetic rubber was computed from the financial statement of Terry S.A., the distributor of Havaianas here in the Philippines. The other costs of the materials were computed from the research based on the usual materials used to make aqua shoes. The cost of production was based on the researched article about the cost of production of Havaianas flip flops.

c. Index vs. Competition COMPAN Y Nike PRODUCTS Php 1,695

Classic Adidas Speedo Aqua Socks Php 1,995 Boat CC Php 2,399 Hydro Trainer Water Shoe Keen Php 1,920 Roatan Php 4,800 Cimarro Havaiana s Aqua Php Coast n 1,999 Php 1,999 Shore Php 959 Php Wave Walker Zip 959 Surfwalker 2 863- Php 1,535 Aqua Jane Water Shoe Php 3,840 Php Madrid Ballerina 3,840 Madrid Php 1,151 Shore Cruiser Water Shoe Php 3,600 Sienna MJ Php 1,999 Coral Php 1,535 Aqua Php 1,679 Hydro

Jane Slip- XP Pro on Water Shoe Php 4,320 Erin Ballerina Php 1,999 Stream Php 1,699 Pearl

MJ Php 1,999 Php Breeze 1,699 Caban

3. Place a. Distribution Strategy Havaianas Aqua will be using the same distribution strategy of Havaianas since they will be sold in the same retail stores as the flip flops. It will be distributed by Terry S.A. Incorporated, the brands exclusive distributor in the Philippines and the only one authorized to market the brand. Terry S.A. was acknowledged to be the Best International Distributor for 2008 by Sao Paulo Alpargatas so it is more than assured that they will also effectively distribute Havaianas Aqua. The retailers are carefully selected and screened by both Terry S.A. and Sao Paulo so as to ensure the brands integrity and protection of trademark hence, the quality and authenticity of the products would be well guaranteed. Unlike the other brands that sell aqua shoes, particularly Nike and Adidas, Havaianas Aqua wont be pulled out after the summer season but rather would be available all year round, with its styles and designs to be updated regularly. It is the shoes premise that they would be stylish enough for them to be used not only for athletic and beach-related summer activities but also for casual day-to-day wear so it should really be available throughout the year. Furthermore, with our problem of global warming and climate change that causes unpredicted rains and

thunderstorms here and there, Havaianas Aqua should readily be at the line of sight in times of need like this. Accessibility would be a key factor in the distribution so as to fit the active and busy lifestyles of the target market.

b. Distribution Scheme and Trade Channels

From the production in Sao Paulo Alpargatas in Brazil, Terry S.A. have the exclusive rights to distribute Havaianas Aqua to the authorized retailers in the country, which will then make the shoes available to the market. Currently, there are 116 of them and

presented below is the breakdown of the number of stores per region.

As per the terms and agreements of the distribution, the availability of the shoes in the retail outlets will depend on the orders placed by the stores themselves. Therefore, there is a probability that not all of these retailers would be offering Havaianas Aqua. Strategically, though, they would be made most available in the outlets near the beach like those in Boracay and the huge stores in all urban areas in the country, specifically Metro Manila, Cebu and Davao, where its target market is more likely to be found teens and young professionals of Class A and B, who frequently go to the beach.

4. Promotions a. Overall Promotion Strategy Being an established pioneering brand in the Philippines, the brand name Havaianas already serves as a major promotion strategy for the new product line, Havaianas Aqua. Given the success of the promotion efforts of Havaianas Flip flops, Havaianas Aqua will also bank on the same promotion strategies. However, since aqua shoes are relatively unfamiliar to the general public, as shown through this papers survey, Havaianas Aqua aims, at the same time, to increase awareness of such a product and to create value for the modern Filipina women. Such awareness efforts would project the features and benefits of Havaianas Aqua that would lead to its role as a necessity given various environmental conditions sandy, wet, rocky etc. Having

said that, it also follows Havaianas Flip Flops promotion strategy of showcasing itself as a casual footwear for any occasion. Havaianas Aqua would be largely promoted through artistic print ads strategically placed in locations frequented by its target market. There would clearly be no promotion initiated by Havaianas Aqua itself through television and radio advertisements. Much like Havaianas Flip Flops, it would sponsor or partner with events that are generally related to the image Havaianas Aqua seeks to exude. Lastly, Havaianas Aqua would take advantage of Havaianas Flip Flops existing means of promotion such as their website, facebook account, stores, implicit celebrity endorsements and havaianas cult following, the Havies or

Havianaticos. Moreover, this would be deemed effective since the survey study shows that most people know of aqua shoes through print ads and word of mouth. b. Advertising Print Advertisements Following how Havaianas Flip Flops started promoting its product line, Havaianas Aqua would also focus more on advertising through print ads. Such print ads would either feature artistically designed and colorful layouts of its aqua shoes or photos of models or awareness-related concepts. Print ads showcasing colorful layouts would help associate Havaianas aqua shoes line to Havaianas image as a colorful and fun brand. In this way, Havaianas aqua proves itself to be go-to for fun, fashionable and colorful designs. Print ads showcasing photos of models aim to identify the lifestyles of Havaianas Aquas target market. Print ads showcasing awareness-related concepts would be presented through quirky antics

demonstrating just why Havaianas Aqua is a must have. Some of these could

imbibe a sense of fear to relate to the primary benefits that aqua shoes or Havaianas Aqua would bring. These print ads would be in the form of posters, tarpaulins, magazine advertisements, billboards and wall designs. Magazines where Havaianas Aqua ads would be placed will be Mega, Preview, Cosmopolitan and Preview.

Word of Mouth/ Bandwagon Through loyal consumers of the existing Havaianas Flip Flops, Havaianas Aqua hopes to depend on the word of these Havianaticos. Given that they already have an online community for Havaianas and a Havaianas Mailing List, Havaianas Aqua would use these systems to disperse information and other promotion. Moreover, Havaianas Aqua would hold gatherings or events especially for this fan base so as to assume them the role of opinion leaders for the new product line. They would also be constantly updated regarding the product line. Havaianas

Aqua will not have any official celebrity endorser. Rather, it would count on celebrities participation in events or product launchings as an implicit product endorsement itself. It would also rely on being casually mentioned/worn by celebrities. Havaianas Aqua would then bank on spreading how it was used by these personalities through other forms of media like fashion blogs, the Havaianas Facebook account, and magazines.

Source: Make Your Own Havaianas 2009, Havaianas Philippines Facebook Account

Bianca Gonzales, TV personality, at the MYOH 2009 Source: Make Your Own Havaianas 2009, Havaianas Philippines Facebook Account Infomercials

In the events to come, Havaianas Aqua would provide infomercials regarding the benefits of aqua shoes. In this way, the public would be familiarized with the existence, usage, and value of aqua shoes. Consequently, it would also capitalize on Havaianas Aqua as the pioneering brand for aqua shoes by showing its edge as a youthful, fashionable, and popular brand. Infomercials would also be shown inside select Havaianas stores. Website As the internet is the most accessible and reliable source to Havaianas Aquas target market, Havaianas Aqua would also have its own part in the Havaianas website. Aside from the general information it would give regarding aqua shoes and Havaianas Aqua as a new product line, it would also include the lines different designs. Furthermore, the website would allow its visitors to look over designs in a 3D way. They would have the advantage of being able to go over the designs at different angles by simply hovering the mouse pointer over them.

c. Consumer and Trade Activities Havaianas Aqua ads will be placed in strategic locations catering to its target market. Promo materials would be placed inside malls where Havaianas stores and authorized resellers are located. In some activity centers, Havaianas Aqua would have exhibits or programs presenting the different designs of its product line. Furthermore, ads could be placed inside Rustans department stores. Since the location of the Havaianas flagship store is also the area for Havaianas Aquas target market, it is sure to have even greater promotion in Bonifacio High Street. By greater, it would be by means of having sculptures and wall designs of Havaianas Aqua along that area. d. Merchandising/ Point of Purchase Materials In all the Havaianas existing stores, Havaianas Aqua would have attractive window displays. These window displays would highlight Havaianas Aqua as an emerging beach casual footwear staple. Since Havaianas retailers are different types of stores, ranging from exclusive Havaianas retail outlets, to shoes and clothing stores, department stores, sports shops and even spas, hotels and resorts, they would be offered with different proposals as to how their Havaianas Aqua displays would look like. As for other authorized resellers, Havaianas Aqua would also have attractive window displays depending on its deal with the reseller. Havaianas stores and authorized resellers would have a special wall/shelf dedicated to Havaianas Aqua. The design of the wall would vary depending on the season. Since Havaianas Aqua

are not just expected to be used for the beach, the wall designs would depict varying setting concepts. For example, the wall design could be a beach setting for the summer season while for the rainy. Along with these would be quirky little trivia notes pushing the need for Havaianas Aqua. An example of a trivia note would be as follows. DIP IN. SLIP IN. NEOPRENE! Its not the heat of the sun. Its the heat of the sand! Walk, walk, burn! Neoprene wont take any of that! Your lovely footsies should have the best tender love and caring it deserves! Neoprene provides great protection against the cold and the heat! Whether its the chilly breeze or the scorching heat, neoprene assures just the needed insulation for your feet! Havaianas Aqua is made with this neoprene to ensure your feet just wont stand out from the crowd. Theyd also stand the heat, rain, wind and many more! Shake it. Move it. Anywhere you want it! Walk. Run. Skip. Hop. Jump. Gallop. Dance. If only you really could at the beach, right? Alas, going bare or flip flops arent enough. Rocks, pebbles, sea urchins, crustaceans and the list goes on! Theyre just all out to get our feet! Protect and Conquer! You thought you could totally protect your feet by slipping on some rubber shoes? Wrong move! The sand just wont let you. A little here. A little there. Sand just keeps getting in your shoes! And in your nerves!

For the small boutiques and shops with very limited space, this barrel-like rack may be used. It stands alone and may be placed beside the flip flops rack. In Rustans department stores, Havaianas Aqua would have its own center island that would be similar to the window displays found in Havaianas stores as mentioned. Figure 3.4.1 Window Display

4 feet 6 feet & 4 feet 8 inches

1 foot

e. Publicity/ PR/ Events As for Havaianas Aquas promotional events/ activites, it would sponsor school events specifically universities. Such universities would be those where Havaianas Aquas target market would be in. Opportunities in being involved in school events would be getting exposure to this demographic and establishing itself as a youthful product line. Aside from that, Havaianas Aqua would hold its own fashion show and also partner with other designers/ brands that have the same target market to be in their fashion shows. Such efforts would be essential in assuring that Havaianas Aqua is a fashionable choice. It would show that it would actually complement different clothes and styles. Moreover, partnering with different designers/brands also help in enhancing the image its creating to its target market given that these partner

designers/brands also uphold the same advocacy. This advocacy would be geared to the modern, fun, and fearless Filipinas however diverse their lifestyles may be. These fashion shows would not necessarily be confined to the beach. It could also be anywhere within the metro like the Rockwell Tent. Havaianas Aqua would also have product launchings through sponsorships in beach parties/events and water sports events or competitions. Such beach parties/ events would be those organized by television networks specifically ETC, Studio 23 and MTV. The mentioned television networks are known for hosting parties that offer wide media coverage. Moreover, they are sure to bring in the target market for Havaianas Aqua. Also, Havaianas Aqua would hold its own launching beach party to bring focus to this new product line. This event expects to invite lots of celebrities from different industries to the event. Moreover, it would emphasize on the theme of fun and sporty Filipina empowerment.

Source: Camsur Watersports Complex Official Website

Source: MTV Philippines, MTV Summer Break with Coca Cola Event

IX. 3-Year Financial Forecasts 1. 3-year Sales Projections (volume/sale) YEAR 1 SALES VOLUME MEDIAN PRICE SALES VALUE 472,474 pairs Php 1,849 873,602,650.96 YEAR 2 481,072 pairs Php 1,849 889,501,813.30 YEAR 3 489,824 pairs Php 1,849 905,682,855.69

The sales volume was computed by multiplying the percent of those willing to buy our product which is 60.98% and the target market size. The sales value was computed by multiplying the computed sales value and the products median price.

2. Detailed Marketing Budget and Marketing Timetable MARKETING CHANNEL PRINT ADS BILLBOARDS YEAR 1 3,000,000 2,500,000 YEAR 2 2,500,000 2,000,000 1,720,000 YEAR 3 4,000,000 3,000,000 1,720,000

WEBSITE AND 1,720,000 ONLINE PROMOTIONS EVENT PROMOTIONS OTHER PROMOTIONAL ACTIVITIES TOTALBUDGET 6,000,0000 1,500,000

3,000,000 1,300,000

6,500,000 1,600,000

14,720,000

8,720,000

17,220,000

3. 3-year Media Schedule

Year 1 Marketing Activity Print Online & Internet Billboards In-store Promo
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Year 2

Marketing Activity Print (Mags, Tarps Posters) Online & Internet Billboards In-store Promo

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Year 3 Marketing Activity Print Online & Internet Billboards In-store Promo
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

To start Havaianas Aquas first year, it will have its own launching beach party. Other event promotions will still depend on potential clients, sponsorships and upcoming events. All marketing activities will be ongoing the whole year round till its third year since Havaianas Aqua is still building on consumer awareness of its product line. The promotions will be heightened during summer vacations and rainy seasons to further promote the function of the product. In Havaianas Aquas first year, it is expected that consumers would have a clear idea of aqua shoes and the market position of Havaianas Aqua. It is geared towards creating knowledge and demand of its product line. Still, for the first year, the focus would be in Metro Manila. In its second and third year, it is anticipated that there would be possible competitors that would follow or challenge what Havaianas Aqua. Havaianas Aqua then needs to be

consistent in its marketing activities so as to defend its position and market share. Also, Havaianas Aqua aims to strengthen advertising beyond Metro Manila such as those authorized resellers. This would most probably be in highly urbanized areas such as Cebu and Davao.

4. 3-year Pro-forma Income Statements YEAR 1 SALES COST OF SALES GROSS PROFIT OPERATING EXPENSES ADVERTISING EXPENSES NET INCOME 873,602,650.96 518,147,008.78 355,455,642.18 124,048,629.10 9,720,000 221,687,013.08 YEAR 2 889,501,813.30 527,577,043.59 361,924,769.71 136,453,492.01 3,720,000 221,751,277.70 YEAR 3 905,682,855.69 537,174,265.74 368,508,589.95 150,098,841.211 12,220,000 206,189,748.74

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