the operation strategy of Foot Locker Inc.
The following paper reviews the operation strategy of Foot Locker Inc. which is an apparel and footwear company, with a focus on their sale for the footwear. The company is based in New York, with fierce rivals such as Finish Line Inc., Wal-Mart among others (Locker, 2015). The company is involved in several operational strategies, and to understand the strategies, the paper seeks to understand the situational analysis of the firm by using the SWOT analysis.
Economies of scale
The economies of scale is the ability of a company to lower its unit costs by increasing its scale of operation (Macchion. Et, al., 2015). When it comes to economies of scale, large companies have better chances of excelling when compared to small companies, and the larger the operations, the lower the cost per unit, and the greater the competitive advantage the company holds against its rivals (Martínez-Mora, and Merino, 2014). When it comes to economies of scale, footlocker is not left behind for they have been focusing on the expansion of their athletic shoes, and as such, they remain more economical in operations. The company has combated the threat of new entry that is rampant in the industry in their entry to new markets and expansions globally (BNN Bloomberg. 2018). The company has stores in Australia, Europe, and New Zealand, which serves it as an advantage of lowering its unit cost.
In addition, the company uses advertising of its shoes in promoting its economy of scale (Weigold, 2013). The company has invested in advertising in places where big events are being aired on TVs such as Super Bowl and FIFA World cup, and which are usually watched globally and as such, they manage to reach out to consumers who are watching (Locker, 2015). In response to the large number of consumers they reach, they provide them with high-quality shoes and in so doing, they keep up with the demand of the consumers. By using the advertising platforms and their website, they manage to attract more consumers by getting them the information about their new products that are available. Consequently, the advertisements provide Foot Locker better cost advantages when compared with their rivals in the industry.
Porter’s Five Forces
Rivalry among competing sellers- this is a strong force faced by Foot Locker in its selling of the footwear (McIver, Lengnick-Hall, and Lengnick-Hall, 2018). The strength of the force is due to the increased competing strength of their rivals in the industry. Consumers hence have a difficult time choosing from the many companies, as a result, companies find it hard to provide high-quality products at an affordable price. Also, there are is a decrease of demand from the consumers especially due to the global financial crisis posed by the current Corona Virus issue, which has led to decreased disposable income to the consumers, and hence they classify athletic shoes as a luxury but not a basic need. The decrease in demand leads to companies attacking one another in an attempt to gain a greater market share.
The threat of potential entry- to manage the competitive edge of Foot Locker, the company has to manage the challenges that come with the innovativeness in the footwear industry, better ways of doing things, and the pressure that comes from lowered prices, new value propositions and reduced costs (Spillan, and Ling, 2015). However, Footlocker is always on the lookout for new designs, new products, and they have built their economy of scale, and as such, they have chances of overcoming threats of new entry.
Bargaining power of suppliers- numerous suppliers supply footwear in the industry, and as such the dominant suppliers are likely to decrease the margins that footlocker has in the market (Tanwar, 2013). The powerful suppliers contain bargaining power and since the company requires quality products it may be extorted by these suppliers. Inconsequent, they reduce the profitability of the company. The company, however, has an efficient supply chain that has multiple suppliers, and it also experiments on designs of their products with different materials to avoid being exploited by suppliers and ensure that their profitability does not go down.
Bargaining power of buyers-the bargaining power of the consumers is usually facilitated by the availability of numerous sellers, and others who avail the same products at an affordable price (Fern Fort University. 2020). As such, consumers can easily move from one company to the other. Foot Locker, however, has attracted a large customer base by innovating new designs, give discounts and offers to their customers, as a way of ensuring they remain loyal to the company.
Threats of a substitute- the threat is increased if the substitute products is high and offer a value proposition that is unique from the present offering ((Tanwar, 2013)). To curb this, footlocker tries to remain service-oriented instead of being product oriented.
Sustainable Supply chain strategy
Consumer demands and increased regulations have steered supply chains to move towards sustainable directions (Giannakis, and Papadopoulos, 2016). Sustainable supply chains go beyond environmental concerns, to social, and economic concerns as well. Sustainable supply chains avoid compromising the environment and business. Having recognized this, Foot Locker has revisited its business models and ensured that the supply chain it uses takes into account the societal and environmental reference points. The company has, therefore, ensured that all its partners consider their actions and processes and how society and nature can support them over the long term.
Driven by its corporate values and cultures, Foot Locker has taken the initiative and complied with the stakeholder’s theory. The theory recognizes the view of capitalism and emphasizes the interconnectedness present between a business, and its employees, consumers, communities, investors, suppliers, and other people that are affected by the activities of the business either directly or indirectly (Freeman, 2018). It has, therefore, created value for its stakeholders as a way of ensuring that the place they invest their money has a concern for them. The company, as a result, supports education through funding students via scholarship, it supports the employees by training them, taking their needs to be their concerns and they appreciate the diversity of employees, they provide value to their consumers through product assortment, and they make decisions that are not compromising to the environment (Foot Locker Inc. 2020).
In conclusion, Foot Locker has improved its competitive advantage by creating an operational strategy that is firm and competitive. Their creation of the economy of scales is a clear indication of the company’s need to compete in the industry.