UNIVERSITY OF THE PHILIPPINES

In the Visayas

Cebu College

Gorordo Ave., Lahug, Cebu City

________________________________________________

In partial fulfillment

of the course requirements of

Management 173

Case No.2

L.A. Gear, Inc.

________________________________________________

Presented to

Prof. Gretchen Chaves

Presented by

Balingcasag, Honeylyn

Gabucan, Anya

Homecillo, Marie Grace

Mesa, Maria La Arnie

Laput, Wynn

February 9, 2010

I. SITUATIONAL ANALYSIS

INDUSTRY ANALYSIS

The athletic shoe market comprised about 50% of the US general footwear market.

The domestic retail shoe market was expected to continue to grow at a rate of 5.5 percent

until the end of 2000.

In the US, the two largest athletic shoe makers were Nike and Reebok with a

combed 50% share of the market. Majority of their products are manufactured in countries

outside the US such as the Asian, European, and South American countries. This caused

the high mark-ups to the retailers and consumers which were nearly 100%.

The footwear industry was seasonal rather than cyclical. Fluctuations in sales and

profitability were attributed to changes in advertising expenditures, price, product quality and

overall market trends.

Barriers to entry such as dependence on heavy advertising, brand awareness and

intensive R&D made entry to the footwear industry difficult. Companies spent large amounts

to do advertising which were their means for promoting new styles and creating brand

awareness. This made it difficult for the smaller companies which do not have enough

revenues to produce effective marketing campaigns. Brand awareness was also a barrier to

entry since consumers usually purchase based on “how they perceived the brand to perform

or on its fashion characteristics”. Research and development demanded excessive capital

from a company. Large budgets were allocated on R&D because this was how the company

determines the latest trends of the market and the possible products that it could develop.

Barriers to entry in competitive discount athletic footwear market were less formidable. Mass

producers usually carve out a niche “through brands they licensed or created on their own.”

Many footwear companies were starting to expand their operations overseas

because the US footwear industry was seen as a maturing industry. The international market

offered a bigger consumer base especially that more consumers were starting to get

interested in the US sports like basketball.

FIRM ANAYSIS

LA Gear was founded by Robert Greenberg which initially promoted the Southern

Californian lifestyle. Its early success was due to its innovative styling and ability to respond

to the market quickly. As the company grew, it opted for initial public offering and used the

proceeds to fund its growing working capital requirements and to finance advertising and

promotional campaigns. Marketing campaigns often featured scantily clad models and

attractively styled shoes designed primarily for women. The company was also publicly listed

and stocks rose to more than 178 percent. However, the stock price started to decline and

investors were losing confidence on the company. It started to experience financial

difficulties with the failure of its Michael Jackson shoes. Net sales and market share dropped

and net losses were incurred as a result. To enhance its credit rating, it sold 30 percent

stake to Trefoil Capital Investors L.P for $100 million. Following the investment, LA Gear

adopted a retrenchment or turnaround strategy to restructure the company's operations.

Under the turnaround strategy, the top management was replaced (including

Greenberg) and the new board of directors was made up with highly experienced members.

The strategy also introduced a new advertising campaign that was built around the theme

Get in Gear which changed the focus from promoting a fashionable shoe to promoting a

performance shoe. Athletic personalities were contracted for the campaigns instead of

celebrities. Product lines were divided into three categories – athletic, lifestyle and children --

in an effort to create a clear identity for LA Gear. Marketing campaigns focused on projecting

a consistent brand image across varying retail price points and distribution channels. With

this, products were marketed into two brands: the higher priced premium brand LA Tech for

the newly released, and LA Gear brand with domestic prices under $70. The LA Gear logo

was also dropped with the belief that the name was a liability to performance shoes.

The company also reduced its manufacturers to only those which are known for their

quality products as part of the turnaround strategy. It also engaged a sourcing agent that

would inspect finished goods prior to shipment by the manufacturer, supervising production

management, and facilitating the shipment of goods. There was also a reduction of its

employees and company occupancy of leased office space in five buildings to a smaller

space in two buildings. Apparel marketing and design operations were also discontinued.

Comprehensive market research was conducted using a variety of conventional

research techniques in designing its products. It depended on focus groups, product testing

and interviews with customers and retailers.

The company also increased its investment in the international market through joint

ventures, acquisitions of distributors, and the creation of wholly owned foreign subsidiaries.

It began to distribute its products through specific channels using what it called “Gear

Strategy Classification System”. Distribution channels were grouped in terms of Image,

Mainstream, Volume and Value. Each of these group marketed different products of the

company ranging from technological to their aesthetic features. It also adopted a next day

open stock system where retailers could order products and have them shipped within 24

hours. But the system had problems and to address these, the company adopted the futures

ordering system.

LA Gear accumulated inventory greater than necessary for its business because of

the imbalance between inventory purchases and sales. As a result, it sold its inventory at

significant discounts which in turn resulted in lower margins.

ECONOMICAL ANALYSIS

An economic recovery was laid down by the Federal Reserve Board to keep prime

interests low and gradually expand the money supply. Inflation rates were also kept at less

than 4 percent. However, consumer confidence in economic recovery was low and

continued to be a major obstacle to increase consumer and business spending.

LEGAL ANALYSIS

The Textile, Apparel, and Footwear Trade Act was passed which would have set

highly restrictive global quotas on imported textile, apparel and footwear products. However

this was vetoed by Bush and sustained by the House of Representatives. There was high

probability though that the same legislation would be passed again in the future and this

would put restrictions on companies relying on manufacturers outside the US.

Suppliers in Taiwan, China, Indonesia and South Korea were placed under “priority

watch list” for engaging in unfair trade practices. If proven to be engaged in such practices

and the US might retaliate against them, this would result to increases in the cost or

reductions in the supply of footwear.

POLITICAL ANALYSIS

Markets which were previously closed to Western companies were now fairly wide

open because of the political changes in Eastern Europe and the Soviet Union. This may

perhaps a good advantage for companies who have a vision of expanding their operations

internationally, particularly in this country. US footwear companies had the chance of

importing and distributing their goods to this country.

Enactment of NAFTA among the US, Canada and Mexico, was likely to strengthen

US exports. They had also expected tariff reductions which consequentially may raise U.S

real GNP by 2000.

CULTURAL ANALYSIS

In the U.S market, as well as the other countries, were favorable for footwear

producers. An increasing segment of the population was becoming more health conscious,

engaging in athletic activities such as jogging and walking. Walking had an increasing

popularity, thus, it was anticipated that the walking shoes market was the largest in the

footwear industry. This market includes those in the mid-30s and up.

II. PROBLEM IDENTIFICATION

Problem

What strategy will the company implement to increase L.A. Gears’ sales and

market share?

How will LA Gear revive its brand image to regain its leadership in the US footwear

market?

Sub Problem:

How would the company position L.A. Gear to the U.S. market?

Objectives

To increase sales by 30% in one year.

To increase market share by 10% in one year.

To increase inventory turnover rate by 20% in one year.

Key Results Area

Criteria Percentage

Increase market share 40%

Increase sales 40%

Increase turnover rate of

products20%

Total 100%

The criteria that the group had placed in the Key Results Area came from the

established objectives. The group had placed a higher percentage of 40% on the market

share because it is the measurement of brand equity for L.A. Gear. Sales also received 40%

percent because it measures the market share and enables to company to continue

operations. The turnover rate of products was given a 20% because part of the plan is to be

efficient in the inventory management of the company.

III. EXTERNAL ENVIRONMENT

In external environment, there are relevant factors affecting the whole footwear

industry especially L.A Gear and these are: recession, price reduction of competitors,

NAFTA (North American Free Trade Agreement) among the U.S, Canada, and Mexico

markets, fluctuations in the value of currencies, export duties, import controls, trade barriers,

restrictions on transfer of funds, work stoppage, and political instability. These factors have

both advantages and disadvantages since it has a direct relationship on the company’s

import and export activities.

Together with the relevant factors in the industry are the opportunities and threats in

the environment that surrounds L.A Gear. These opportunities are: Growth of international

market; unfocused marketing of Adidas and Puma; International distribution agreements to

independent distributors to maintain a consistent product offering and brand image

throughout the world; and the lifestyle changes in U.S, as well as in many other countries.

The threats also include: maturing footwear market; use of foreign manufacturing

facilities subjected the company to the customary risks of doing business abroad; presence

of competitors both in domestic and foreign market; and the effects of recession.

IV. INTERNAL ORGANIZATIONAL ENVIRONMENT

Under internal environments are the strengths and weaknesses that the company

needed to focus on. The strengths are: New Top Management, adoption of retrenchment /

turnaround strategy, clear outline of the mission and objectives, product development

strategy geared to clear product line and differentiation, “Get in Gear” concept, marketing of

performance shoes under two brand names, foreign manufacturing facilities for lower

production cost, “Sourcing” agents for quality control, Increase in research and development

activities , Gear Strategy Classifications System, Improved Ordering System, and cash

availability due to Trefoils investment to the company.

Company’s weaknesses would also consist; old management’s relentless for fast

growth to attain growth objective, the company relied too much on extensive distribution,

they have delivery delays, their product innovation failed to immediately respond to new

trends, LA Gear’s grave marketing blunder in the line of basketball shoes, failure of Michael

Jackson advertising campaign, Inventory Turnover Rate was poor, and L.A Gear had faced

several lawsuits.

L.A Gear’s board of Directors was composed of 11 members. Three of them were

insiders and others were outsiders with Stanley Gold as chairman. During the old

management, the company was characterized by informal communication system and

corporate culture and scattered departments in several buildings. With the new structure, it

eroded the informal relationships that existed among the company’s management and

employees. Together with it is the seriousness inside the office where coats and tie were

now a regular sight in L.A Gear.

Sandy Saemann, Greenberg’s assistant, was the architect of L.A Gear’s early

advertising campaign. With Paula Abdul and Kareem Abdul-Jabbar as celebrity endorsers, it

was responsible for the increase in the company’s sales between 1985 and 1990. However,

L.A gear’s tumble began, with its biggest advertising deal ever, Saemann was able to sign

megastar Michael Jackson in what was described as the largest endorsement contract with

$20 million. As teenagers everywhere thumbed their noses at the black buckle-laden shoes,

the company forced to stop the entire line and taking a loss of several million dollars.

Lastly, because of the imbalance between inventory and sales, the company

developed an inventory reduction program through selling inventory at significant discount

resulting in low margins. And as a result, a certain number of styles were discontinued.

Corporate level strat(structure, culture)

Businesss level strat (cop.resource:mktg, finance rd, operations, human res. It)

V. STRATEGIC FACTORS ANALYSIS

Strengths:

New Top Management

L.A Gear is now composed of very experienced top management ever since

the deal with the Trefoil Capital Investors. An experienced top management would be

able to handle carefully the operations of the company especially that they had

implemented their turnaround strategy.

Adoption of retrenchment / turnaround strategy

As L.A. Gear incurred losses and suffered much in their declining sales and

equity, a retrenchment strategy was developed by the new management. This

strategy involves many changes in programs and structures within L.A. Gear. The

Restructuring program aimed at paring the company’s cost. It discontinued its

apparel marketing and design operation which they deem not in line of what L.A.

Gear is. The company had also reduced its workforce, with the discontinued apparel

and design operation, to cut down more cost. The company had given sufficient

incentives for those that had lost their jobs.

Clear outline of the mission and objectives of L.A. Gear

A clearer mission of the company was developed to enable them to know

what the company would want to achieve. Together with this, an outline of long-term

and short-term objectives was produced. This would help L.A. Gear in knowing what

strategies to adopt and set direction for the company.

Product development strategy geared to clear product line and differentiation

Augmented in the turnaround strategy, the company also did a product

development strategy. L.A. Gear had involved itself in developing a broad range of

innovative new products for its reorganized product lines. The product lines were

group into three: athletic, lifestyle and children. This gave a reason to L.A. Gear’s

different styles. L.A. Gear had also sought to differentiate its products by particularly

using the materials for shoes in a unique way.

One of the successful fruits of the product line is L.A. Lights. This children’s

line became one of the largest selling shoes in the market.

“Get in Gear” for L.A. Gear

With the changes they had made to their product. They had launched a

marketing campaign that focused on projecting a consistent brand image across

various retail price points and distribution channels. They had launched the “Get in

Gear” motto to specifically create an identity for L.A Gear’s performance shoes and

to separate it from its competitors. This slogan also serves as a tool for better brand

identification.

Marketing of performance shoes under two brand names

L.A. Gear’s performance shoes are marketed under two brand names: the

traditional L.A. Gear and the L.A Tech. With these brands for performance shoes, the

company is able to address different income class segments. L.A Gear would refer to

those shoes whose domestic retail prices are under $70. L.A Tech on the other had

is the higher priced premium brand that features the performance technology of L.A.

It had also made aware the consumers the new quality L.A Gear has when it comes

to performance shoes.

Foreign manufacturing facilities for lower production cost.

L.A Gear uses foreign manufacturing facilities to produce their product. With

these facilities, cost of production of these shoes is lower due to the cheaper labor

cost in other countries. In their turnaround strategy, the number of foreign

manufacturers was reduced retaining only those who are known for providing quality

products.

“Sourcing” agents for quality control

Since the company made use of foreign facilities to produce the shoes, they

had hired persons to check the quality of their products in those foreign places. The

sourcing agent is given the responsibility of inspecting finished goods, prior to

shipment by the manufacturer, supervising production mgt and facilitating the

shipment of goods. These are one of the measures that the company had taken to

keep their reputation good.

Increase research and development activities

As L.A Gear tried to revive its sales and popularity, the company had

conducted a comprehensive market research using a variety of conventional

research techniques in developing its products. They had also maintained close ties

with firms that conducted basic materials research like UTI Chemicals Corporation of

California.

Gear Strategy Classifications System

L.A. created specific distribution channels called Gear Strategy Classifications

System to improve relations with full-margin retailers. In line with this system, the

distribution channels were grouped in terms of “Image”, “Mainstream”, “Volume” and

“Value.” The Image channels were used to market the most technologically advanced

and expensive high-performance products such as L.A. Tech. The Mainstream and

Volume channels were used to market “2nd Gear” and “1st Gear” products which

incorporated fewer technological and aesthetic features.

Improved Ordering System

New management adopted a “futures” ordering system which provided

discounts to retailers who ordered products four to six months in advance of

shipments to enable the company to improve inventory management. This also

strengthens the company’s relationship to its distribution channels due to the

discounts that L.A Gear provides them.

Cash availability due to Trefoils investment to the company

Trefoil Capital Investors had invested $100 million dollars in the company.

This had helped the company have cash when L.A. Gear could not get loans from

credit companies. The cash would enable the company to pay its debts and have

funds for its operations.

Weaknesses:

Old management’s relentless for fast growth to attain growth objective

Greenberg set higher objectives for the company after it succeeded in

increasing its sales with the brightly colored shoes and sexy ads aimed at teenage

girls. The company tried to challenge big competitors, Nike and Reebok, by directly

adding a line of men’s performance shoes. This move was obviously too much, and

too fast. This caused the image of L.A gear to blur, thus, creating an appalling

publicity. This also has caused poor product quality due to desire of hastily releasing

the new line of performance shoes for men, thus, creating a bad publicity for the

company’s name. Consequentially, it has lost its way form its successful attractively

styled shoes designed primarily for women.

L.A. Gear relied too much on extensive distribution

L.A Gear distributes their products through wholesalers who sold into deep

discount outlets. This type of policy flawed the company’s image, thus, making a

number key retail accounts to withdraw or reduce their business with the company.

Delivery delays

These delays refer particularly to the untimely delivery of new product

especially when it is for a certain season. Before the L.A. Gear could delivery, for

example, a spring collection of shoes, their competitors had already launched their

spring collections ahead. Because of this, distributors feel particularly that L.A. Gear

is delayed.

Product innovation failed to immediately respond to new trends

L.A Gear lagged behind their competitors in product innovation. During

competitor’s release of a new technology for their products, L.A gear releases their

own product with the same technology 2 years after them. This “catch-up” strategy

has damaged their relationship with retailers, thus tarnishing L.A gear’s name.

LA Gear’s grave marketing blunder in the line of basketball shoes.

The company had committed a grave marketing blunder in the process of

launching its new line of basketball shoes. The company outfitted their endorsers

with handmade pairs of shoes, since molds were not yet completed. This results

to poor-quality that seriously tarnished the company’s brand image.

Failure of Michael Jackson advertising campaign

This advertisement was the biggest advertising deal that they ever had. The

advertisement was released prior to MJ greatest-hit album. However, this album was

never materialized. This advertising campaign with MJ resulted to big loss in the

company, and eventually forced to discontinue the entire line. They have to recover

from this loss.

Inventory Turnover Rate was poor

LA Gear had greater inventory than sales, thus, making stock of inventory

expensive. The introduction of the company’s new product lines also resulted in a

greater number of styles being discontinued. L.A Gear has to sell these inventories at

significant discounts to reduce inventory.

L.A Gear had faced several lawsuits

L.A Gear’s hasty strategies had led to them face many lawsuits. Their

violation to the U.S securities laws by inflating sales, underpayment of duties for

importation of shipments, and patent infringement led to several money settlements.

Aside from that, this has also caused their image to tarnish, and created a bad

publicity.

Opportunities

Growth of international market

This refers to the increasing international footwear net sales. As showed in

Exhibit 3, International footwear sales had increased by 7% in 1992. This may

perhaps be a big chance for L.A gear to be known internationally. This will help them

increase brand awareness and may increase their market share.

L.A Gear had also begun to focus on Asia .Asia is a huge continent, with

large population, and is viewed also as huge market. L.A gear had found this as a

potential retail sales market. Inevitably, L.A gear started promotional alliances and

equity partnerships with Asian companies.

A growing number of consumers overseas were becoming increasingly

interested in the U.S sports. Due to the increasing popularity of US sports worldwide,

people are becoming fascinated in adapting them, particularly in basketball. This

helps advertising reach across the US borders. This will increase brand familiarity,

awareness, and perhaps, popularity.

The US footwear market was valued at about $12 billion with Athletic shoe

market comprise about $6 billion

This trend of the domestic shoe market was expected to continue to grow at a

rate of 5.5% at least until the year 2000. L.A Gear may perhaps still continue its

operation in the U.S market.

Unfocused marketing of Adidas and Puma

These two German companies are also competitive athletic shoe brand in

Europe. However, they have an unfocused marketing strategy that L.A Gear can take

advantage of so that the L.A. Gear product can grow in the European market.

International distribution agreements to independent distributors to maintain a

consistent product offering and brand image throughout the world.

Lifestyle changes in U.S, as well as in many other countries

An increasing segment of the population was becoming health conscious,

engaging in athletic activities such as jogging and walking. According to industry

sources, 75% of the walking-shoes market consisted women in their mid 30s and

up.

Threats

The maturing footwear market

U.S footwear industry was maturing and analyst expected that consumers

would purchase more non-athletic footwear than athletic footwear. Many footwear

companies began expanding overseas where the market was expected to grow at a

rate of 23% a year in the next decade due to the growing footwear market in the US.

They can extend their operation and may optimistically gain profitable sales outside

U.S. This will help the company to increase its brand awareness, not just

domestically but also worldwide.

Use of foreign manufacturing facilities subjected the company to the customary

risks of doing business abroad

L.A gear manufactures their products in China, South Korea, Taiwan and

Indonesia. The footwear products imported into the US by L.A gear were subject to

custom duties. Doing business abroad is subject to customary risk like fluctuations in

the value of currencies, export duties, import controls, trade barriers, restrictions on

transfer of funds, work stoppage, and political instability. Although these factors may

not seem to affect L.A gear, the company still has to be cautious on policies so that

they won’t tarnish their image.

Presence of Competitors both in domestic and foreign market.

The presence of several competitors in US market increases pressure on L.A

gears side. They have to struggle to be differentiated from among these competitors.

“Catch-up” strategy will just weaken the company and will lose millions of dollars.

Their presence also causes the lowering of prices.

Effects of Recession

Recession brings the company at risk of scarce resources and low demand of

the market. This makes the company feel unprofitable on their operations.

VI. ALTERNATIVES PRESENTATION

1. Push Strategy

L.A Gear will drive their product through distribution channels to their final consumers.

They will direct their marketing actions, mainly personal selling and promotions, towards

channel members to encourage them to carry the product and to promote it to final

consumers.

Pros:

Enhance distribution channel relationship

This strategy allows L.A gear to get in touch with their distribution

channels. The company communicates with distribution channels frequently

regarding the status of the product in their channel.

Give of brand shelves’ space

As the company personally connects with their distributors, the company

could be assured that L.A. Gear would really have shelves space in their stores.

More shelve space would give L.A. Gear more exposure for the customers to

notice.

Lesser cost in advertising expenditure

In this strategy, the company promotes the brand through cooperative

advertising. Together with the distributors, they make the advertisement to

promote not only the L.A. Gear brand but also the distributors’ store. Having a

partner would entail relatively lesser cost in producing those advertisements.

Cons:

Inconsistency of retailer’s price

Retailers in which L.A. Gear will be distributed might give different mark-

up for the product and in the process making pricing inconsistencies.

Possible mismanagement of Inventory by company due to focus on distribution

Since this strategy will not be demand-driven, the excessive inventories

due to the need for large safety stocks might worsen inventory problems. In the

process, it would increase stock of inventory costs.

2. Pull Strategy

L.A Gear will direct their marketing actions, principally on advertising and consumer

promotion toward final consumers to encourage them to buy the product. The strategy’s

objective is to create the demand from the final consumers.

Pros:

Enables them to forecast inventory

This strategy can help the company project and can approximate the number

of inventories to stock since the consumers directly demand to channel

distributors.

Easy to respond to trends

Because this approach would be driven by the demand of the customers, it

would be easier for the company to see future trends. This would enable them to

estimate the volume of product to be produce and also if L.A. Gear styles are still “in”.

Entice customer to try the product

In this strategy, the company uses extensive promotional and advertising

strategies. These campaigns build curiousness to the market. When the market

already has a snooping act, they instigate looking for that brand or product and

optimistically purchase it.

Lure customers from competitors

An insistent advertising and promotional activity induces customers away

from the company’s competitors. The more extensive their campaign will be, the

more the customers become curious about their brand or products.

Can hold and reward loyal customers

In this approach, customers demand a product from the channel distributors

or even from the company. In this way, they can appraise the buying pattern and

behavior of the customers. When customers become frequent purchasers, the

company or the distributor can make them consistent buyers by giving them rewards

and incentives.

Greater reach of audience

The use of aggressive promotion and advertising by the company can reach

and communicate to the greatest possible number of audience. It is not anymore

necessary for the distribution channels to heavily advertise the product.

Nevertheless, these channels serve only as a location where the product can be

acquired.

High exposure that can easily increase consumer awareness

Heavy and extensive promotions and advertising communicates to the whole

market. The more these advertisements and promotional activities are exposed and

flashed to the market, the more the consumers become attentive and aware of the

brand. This is due to the high retention created by the promotional and advertising

activities.

Production and distribution are demand-driven

The company can manage and control their production and distribution

operations since the company rely only on the frequency of consumers’ purchases.

Cons:

Expensive / Costly

Aggressive advertising and promotional activities requires an initial greater

cash out flows which the company might not be able to finance. Pricey but highly

effective ad and promotional tools include media, tabloids, billboards, and the like.

If not readily available in retail stores, might cause disappointment to consumers

The retention created by the advertisements and promotions entice the

consumers to look or even buy the product. When the consumers find out that the

product being advertised isn’t readily available in major distribution channels, they

become dissatisfied by the service. This might create a bad impression to the brand

and its products. This bad impression may perhaps be dispersed to other consumers

which will create greater burden to the company.

Underestimation / overestimation of demand

The company becomes familiar with their consumers’ buying pattern. They

can track the frequency of buys and might predict the next buys. However, it is not

too certain that the consumer would really demand or buy according to what the

company expects. Underestimation of the consumers buying trends can ruin the

company’s reputation by creating a bad impression to the consumer. On the other

hand, overestimation of demand puts the company at risks of large inventories.

Evaluation of Alternatives

Criteria PercentageAlternative

1

Alternative

2

Increase market share 40% 31% 34%

Increase sales 40% 33% 36%

Increase turnover rate of

products20%

10% 17%

Total 100% 74% 87%

In the first alternative which is the push strategy, the group gave 31% in market share

because through distribution channels, it will build brand equity in a way that many retailers

would now want to market L.A Gear. For the increase in sales, the group also decides to

give 33% because there are consumers who prefer convenience where they can easily

purchase and re-purchase L.A Gear anywhere they want. While in inventory turnover, the

group only gave 10% because focusing on distribution channels would increase inventories

on hand as a result of large safety stocks.

The second alternative is the pull strategy which has a 34% in market share. Through

advertisement and intensive promotions, the company will be given the chance to inform and

educate consumers about their product’s unique differentiation that would encourage them

to prefer L.A Gear. A next criterion is increase in sales which yields 36% in such a way that

the more the company communicates their products, the more the costumers will buy it. And

also, promotions will develop brand awareness on the consumers that will definitely turn into

purchase, thus, leads into greater sales. The last criterion is increase in inventory turn over

with 17%. The group decides to give high percentage on this because they believe that

having intensive promotion could leads into greater sales that will also increase inventory

turnover rate.

VII. RECOMMENDATION

Short-term

The group recommends that LA Gear Inc. should adopt the pull strategy in order to

address its current problem regarding the losing sales and market share. Through this

strategy, the company will direct its marketing activities toward final consumers to induce

them to buy the product. Part of the marketing activities is the extensive advertising that

would be an effective tool to convey the message directly to its target markets. It would

increase brand awareness. If the products will successfully deliver the ad campaign and will

gain customer satisfaction, it would strengthen brand equity for LA Gear.

LA Gear Inc will do extensive advertising and consumer promotions to build up

consumer demand. TV spots can be used to advertise the brand to a broader audience

since the television has good mass market coverage. It is also a good media vehicle since

the products need a high visual representation. Consumer magazines have high credibility

and prestige. They also last longer and have a good-pass-along readership. The internet is

also a good advertising medium because it has interactive capabilities. LA Gear can develop

a website so that consumers and members of other publics can visit the site for information.

Consumer promotions should be used to help build long term market share.

Brochures and fliers can be distributed to consumers in different locations to attract

consumers to try the revitalized LA Gear products.

For public relations, the company can hold special events to bring the brand to the

consumers. Press releases have strong impact on public awareness at a much lower cost

than advertising since the company does not have to pay for the space or time in the media.

Rather, it pays for a staff to develop and circulate information and to manage events.

LA Gear can organize trade shows to promote their products. These shows can help

the company reach many prospects and find new sales leads, meet new customers,

introduce new products, sell more to present customers and inform them about LA Gear’s

products.

To build and increase LA Gears’ relations with the public, they can sponsor major

sports events. This tool can help build up corporate image and gain favorable publicity. More

importantly, in can increase short term sales or help build long term market share.

Long-term

After the company will establish back their brand equity and address their problem in

the U.S. market to increase their sales and market share, L.A. Gear would then continue to

internationalize and try to use its U.S promotions in the international market. The

international market is huge, especially Asia. The huge market would be a source for more

sales to the company experience.

THE TARGET MARKET

Athletic – male and female that belongs to ages 14 – 35 years old, who are highly

involved in sports and recreational activities. They prefer comfort brought about by

good cushioning and proper structure that supports the foot.

Lifestyle – male and female that belongs to ages 14 – 35 years old, likes

fashionable shoes brought about by the design and style

Children – children, both male and female, belonging to ages 5 – 13 years old.

Fashionable and comfortable.

POSITIONING

Athletic

“LA Gear Athletic focuses on delivering shoes with comfort and design. It has good

cushioning and proper structure that supports your feet. It offers true performance during

your sports and recreational activities.”

Lifestyle

“LA Gear Lifestyle focuses on delivering you fashionable shoes. It gives you a lot of

designs and styles to choose from that matches your personality and mood.”

Children

“LA Gear Children focuses on delivering fashionable and comfortable shoes for kids.

It offers good design and style that would complement your kid’s personality.”

VIII. IMPLEMENTATION, EVALUATION AND CONTROL

IMPLEMENTATION

The group suggests that LA Gear’s new top management should focus on building its

brand image through promotional strategies in order to effectively communicate their

turnaround strategy that would strengthen brand equity. In effect, this would increase the

sales and market share for LA Gear. Pull strategy focuses on the development of trust and

perceived value. The “pull strategy” is preferred by the group since it would directly

communicate to the final consumers. In effect, this would create a buzz and increase

demand for the LA Gear products.

The promotional strategies should follow the categorization made by the new

management: athletic, lifestyle and the children’s line. This is in order to not confuse the

consumers to the products delivered by LA Gear. By building the brand name “LA Gear”, it

would also follow that the categorization made will gain consumer awareness.

In order to effectively relay the message of LA Gear to its consumers, the group

recommends these promotional strategies using the pull strategy.

The Pull Strategy

1. Press Conference – This must be done in order to respond to the damaged

perception of consumers to LA Gear. This is because of issues regarding product

quality. Part of the agenda of the press conference is to introduce major corporate

changes like the new top management, introduce the new product lines which are the

three major category of LA Gear (Athletic, Lifestyle and Children’s) and the upcoming

campaigns of LA Gear with the slogan “Get in Gear” campaign. It is also very

important to develop relationships with the media because it allows LA gear to

gain credibility and trust especially when cited in major publications or websites.

Duration: This must be the first advertising strategy of LA Gear. This will be done

once. The next press release will happen if there will be new product innovation or

any important event/activity that the company wishes to convey to the public.

2. Media Tools – There are plenty of advertising methods like TV advertisements,

billboards, posters and print advertising in magazines and newspapers.

Media Vehicles

a. TV ad – The main focus of the TV advertisement is to deliver the theme “Get

in Gear”. The ad would focus on LA Gear’s strengths that would differentiate

them to their competitors. One example is their unique designs and high

product quality. In this way, LA Gear could revitalize its brand image and

position its brand to the minds of the consumers.

Endorsements - La Gear must properly evaluate the potential endorsers for

the brand. The issue regarding the endorsement of Michael Jackson was a

huge loss mainly due to incompatibility of the taste of LA Gear’s target market

to the product endorse by Jackson. For example, Jabbawockeez will endorse

performance shoes (dance) and Avril Lavigne (rockstar) for the lifestyle

shoes.

b. Magazines – LA Gear should advertise on sports magazine since the focus of

the LA Gear is also in the performance shoes. LA Gear could also advertise

in teen magazines so as long as the product advertised is compatible to the

preference of the target market.

c. Billboards and Posters– LA Gear could also put billboards and posters to

further increase its campaign reach.

d. Official Website for LA Gear - This will create a portal wherein consumers

could interact with LA Gear and vice versa. This will also be a good platform

to deliver message to the consumers like the upcoming Spring Line

Collection, Summer Special Collection and etc.

EVALUATION AND CONTROL

As the company implements its strategy, an evaluation of the strategy’s effectiveness

and implementation would be done. The strategy’s effectiveness would be checked through

the increase in sales that the company will achieve upon the implementation. Market share

of L.A. Gear would also be taken into consideration. For the implementation, the sales would

also be used to indicate its success.

The entire pull strategy will be evaluated every year. The main aim of the strategy is

to strengthen the brand equity of L.A. Gear. It will be indicated through the sales that would

come into the company once the strategy would be put into action. The company will then

compare the sales it had received and the promotional expenditure they had incurred in that

year and see if it the spending did pay-off.

For the implementation of the strategy, it will be evaluated quarterly to see its

effectiveness. The company will make a survey of L.A. Gear before they launch their new

promotion. The survey would be about L.A. Gear’s product awareness, knowledge and

preference. After three months, the company would then conduct the same survey and see

where the company stands principally on product awareness and preference. If it improves

the standing of the product it would be retained. In case of failure of promotion, the company

would look into where that particular promotion failed and formulate another or choose

another promotional strategy without repeating the same mistake.