Student: Chihab EL ALAOUI

ID: 118989

CROCS (A): Revolutionizing an industrys supply chain model for competitive advantage
1. What are Croc's core competences?
The core competencies are the sustainable capabilities that are valuable, rare, costly to imitate and no
substitutable, which serve as a source of competitive advantage for Crocs over its rivals. It distinguishes
the company from whole industrys competitors and creates through that its own personality (Ireland, the
Management of Strategy, 9th Ed.). From the details mentioned in the case we can figure out that Crocs
core competencies that fit with all four criteria of core competencies concept is it highly responsive supply
chain, by maintaining the flexibility to the unexpected demands and offers of retailers, with efficiency of
its distribution model and cost advantages created. The crocs top management examined the footwear
industry supply chain and immediately noticed its limitations. The existing supply chain used to process
requests that companies receive from retailers at the beginning of the year on January and manufacture the
demand supplies for the next spring and fall seasons with some excess in order to manage any unexpected
demand. However, this traditional supply chain system had many deficiencies, because retailers had to
base their requests on their forecasts which definitely will lead either to overestimation and unsold stock
and subsequently loss, or underestimation which meant loss of potential profit. Instead, Crocs developed a
revolutionary supply chain system which strengthens its relationship with retailers by quick response to
any fluctuations in customers demands. This result was possible due to the heavy investment made by the
company in its infrastructure and the development of the supply chain with the new management through
3 steps: Further vertical integration into materials; Growth by acquisition; and Growth by product
extension. This will be discussed in 2nd question.
2. How do they exploit these competences in the future?
a) Further vertical integration in to materials: There exist two types of supply chain practices.
Efficient Supply Chain Practices (Lean) which is applied when demand is supply chains are

forecast-driven that implies that they are inventory based. Agile supply chains are more likely to
be information based (Fisher, M. 1997, What is the right supply chain for your product? HBR, 2,
pp105-116). Crocs understanding the dynamics of the industry established an agile network to
connect to its retailers. The main objective was to vertically integrate its operations to the best
extent possible and exercise an option for it to control its inputs and distribution of its products
and services. Specifically this agile supply chain is:
Market sensitive: it is closely connected to end-user trends.
Virtually integrated: it relies on shared information across all supply chain partners.
Network based: it gains flexibility by using the strengths of specialist players
Process aligned: it has a high degree of process interconnectivity between the network
members.
b) Growth by Acquisition: Ronald Snyder realized that acquisition would play an important role to
support growth and started a string of acquisitions to horizontally integrate and support its
strategic moves. Within 2 years of operations Crocs first acquired Canadian manufacturer
Finproject NA in June 2004, which was renamed Foam designs, originally manufactured Crocs
products. The acquisition gave Crocs the intellectual rights to the patented Crostile material. In
October 2006 Crocs acquired Fury and started manufacturing protection gears based on Crostile.
Subsequently in October 2006, Crocs acquired EXO Italia, a company engaged in designing
Ethylene Vinyl Acetate (EVA) products used primarily in footwear products. The most successful
acquisition in December 2006 was a company called Jibbitz, which specialized in manufacture of
colorful Snap-On products as accessories for Crocs footwear. In January, 2007 Crocs acquired
Ocean Minded, LLC a company which manufactured high quality leather and EVA based sandals
for the beach, adventure and sports market. Crocs thus offered a variety in its product range for
varying target markets and this move tremendously boosted the companys sale.
c) Growth by Product Extension: the industry knows changing in requirements, Crocs has performed
extremely well in this sector to fuel the excitement for its customers. Beach and Cayman the

original models is most popular and has been used as a basis of developing other shoe products.
The companys website shows that the company sells close to 31 31 basic footwear models,
ranging from sandals to childrens boots to shoes designed for professionals. It got also license
agreement with Disney, and made shoes incorporating Disney characters. In addition to brand
CrocsRX that was specially designed to meet the special needs of those medical problems that
affected their feet, such as diabetes. Crocs sponsored the AVP Professional Beach Volleyball
Tour, and offered two models with the AVP logo. The company also started to launch accessory
products such as caps, shirts, socks, shorts, hats, and backpacks.
3. To what degree do the alternatives in Question 2 fit the company's core competences, and to what
degree do they defocus the company away from its core competences?
To answer this question, we will try to discuss the strengths and weaknesses of every alternative and the
consequences possible on the companys core competences:
Strength
Vertical

Economies of scale

integration

Effective competitive barrier to entry

Higher degree of control over value

Weaknesses

production in times of falling sales

Possibility of higher costs due to lack of

efficiencies by suppliers

chain

Capacity balancing issues due to excess

Better position to negotiate with

suppliers and buyers.

Growth by

Access to developed technologies

Acquisition

Reduction in competition and defense

against substitute products

Acquisition costs should be able to have

a positive Net Present Value

Integration concerns due to cultural

Ability to meet varied customer

change and differences in

expectations

organizational practices.

Growth by

Economies of scale and scope

Increased production cost

Product

Ability to meet customer expectations

Increased capacity allocation and

Extension

Making product obsolete before

competition catches up and copies design

possibility of excess capacity.

Possibility of lack of supplier and

retailer coordination and as result low
response and flexibility in future

4. How should Crocs plan its production and inventory? How do the company's gross margins affect
this decision?
Most of Crocs products are manufactured in house and this helps reduce inefficient outsourcing. Crocs
could primarily focus on producing molded shoes in China, because of the low duty structure levied in
exporting. It needs to do a quick assessment of other regions in the world and their duty structures and
shift production by transferring adequate production resources and eliminating adjustment schedules for
the short run. Also since the European and US market is saturated with Crocs products, the focus should
be on other countries where excess capacity could be leased. This opens the option of increasing
geographical diversity. Denver distribution network could be as a lean to distribute other companys
products as a step taken to cover the minimum fixed costs. Crocs implemented the global inventory
planning system (ERP). The system will help them take faster decisions and better inventory management
practices as electronic data at point of sale will be now available.
All the strategic moves Snyder has done were to increase Crocs profit margin. The company has a high
gross profit margin compared to competitors and even the industry average 58.8% in 2007. It affects
Crocs ordering behavior of inventory and supplies. Companies with higher margins can afford to keep
more inventories in stock and have a lower turnover rate, as demonstrated in exhibit 4. Crocs has the
highest margins 56.5% and the lowest inventory turnover at 3.5%. The companys margin also gives it
access to more cash on hand to buy into more steps in its supply chain. It also is effectively managing its
production and inventory levels to keep supplies in the stores and shoes in demand.