Developing Dansko

VLACC Consulting Nate Velazquez, Chris Loeffert, Eric Conklin, Jon

Czyzewski, Nick Amadio

Overview

• Industry Analysis…• Competitor Analysis…• Dansko’s Company Strategies…• Potential Options for Growth…• Our Recommendation…• Implementation of Recommended Strategy…

Problems

• Transitioning beyond a mom-and-pop business into a mid-sized organization

• Sustaining growth while maintaining company cultures and values

Overall Economic Overview

• According to the American Apparel & Footwear Association (AAFA) 2004 annual report

• US economy showed positive gains by most measures– GDP increased 3.5% in 2004– Personal income increased 5.5%– Personal Consumption Expenditures (PCE)

increased 6.3%

Industry Analysis

• U.S. footwear industry consists of about 100 manufacturers with sales of about $60 billion

• U.S. Expenditures on clothing and footwear increased 5.0% in 2004 (AAFA)– Consumption predicted to continue to increase

• Comfort Shoe sector surviving sluggish economy• Footwear prices staying consistent

– Prices for rubber footwear increased 0.6%– Prices for non-rubber footwear increased 1.4%

U.S. Consumption of FootwearT

hous

ands

of

Pai

rs

Year

SWOT Analysis

StrengthsReputation

SizeDansko DNASales Margin

Attract qualified employees with business model

Economies of scale with growth

WeaknessesPoor management model

Still learning the business of the industry

No outside expertise“House of cards”

OpportunitiesWell established position with a well

defined market nicheGrowth through mergerIncrease market share

ThreatsIncrease in material costs

Training becomes insufficient and stunts company growth

Growth leads to direct competition with large companies

Competitors

Birkenstock USA, Memphisto, Ecco USA

Market a similar product in quality and price

Entered the market around a similar time period

Differentiate target consumer through different product offerings • Ex. Ecco – Golf Shoes

Birkenstock USA

• Originated in Germany, came to U.S. in 1970’s

• Over 300 style combinations

• Pricing similar to Dansko - $100 +

• Sell through Happy Feet Plus Retailers

• Dealing with counterfeit products online

Memphisto

• Originated in France, came to U.S. in 1970’s as well

• Differentiate products through name• Ex. Zaverio for men,

Bayka for women• Offer resoling for all

products• More expensive than

Dansko - $150 +

Ecco USA

• Originated in Denmark, came to U.S. in 1970’s

• Have a strong sense of Social Responsibility

• Target golfers extensively

• Offer shoes in retail locations

• Similar pricing to Dansko

• Targets a different ultimate consumer from Dansko – comfort for extensive use

Competitors

Dansko

• Originated in U.S. with a Danish manufacturer• Strong company culture• 9 Different Product Lines• “Stay gourmet”• Pricing matches competitors• Rising costs in production are beginning to

affect profits

Option 1 : Not RecommendedMerge with a Big 5 Footwear Company

Pros Cons Absorb senior talent and global outsourcing capabilities

Well-developed sales distribution channel

Designing, engineering, and marketing resources

Increased market share

Clashing corporate synergies

Compromises culture and core values

Loss of autonomy

Risk of being “swallowed up”

Option 2 : Not RecommendedIncrease Production and Supply to Big Box Retailers

Pros Cons Increased market share

Higher revenues

Funds exist to develop supply chain and a larger distribution channel

Saturated market

Lower prices and decreased profit margins

Promising more than you can deliver

Unable to keep the Dansko product “gourmet”

Option 2: Dansko’s Production Effects

Price per Pair ($)

Thousands of Pairs

100

8060

S

S’

DD’

100 125

AB

C

A…..Dansko’s current production with independent retailers

B…..Dansko sells to big box retailers, causing supply and demand to both increase. This results in a lower price and more shoes being sold

C…..After selling to big box retailers, the market is saturated and demand for Dansko shoes decreases. This causes the equilibrium quantity and price to drop causing lower profit margins and lower total revenues

Option 3 : Not Recommended

• Dansko has been a company built from the ground up• They consider themselves as a mom and pop shop• Have a close knit corporate culture • They have notoriety of being very unconventional in their

business ways• They promote an environment that promotes everyone in the

company to provide feedback and ideas• Everyone takes part in every job, “learning as they go”

Continue Independent Upgrading and Utilizing Self Realized Ideas

Option 3: Not RecommendedContinue Independent Upgrading and Utilizing Self Realized Ideas

Pros ConsGet a wide variety of ideas

They have been successful method

Everyone has an influence on a decision

Cuts costs by limiting employment

Everyone learns different aspects of the business

They can stay “gourmet”

•Unconventional way of management

•Lack the industry knowledge to grow

•Higher executives get tied up in lower end operations

•Bad decisions could be devastating

Option 4: RecommendedNew Organizational Structure

• Reorganize and modify positions • Create universal titles

• Bring in industry professionals

• Increase directors’ authority and freedom

Option 4: Recommended

New Organizational StructurePros Cons

Mandy won’t be spreading herself thin

Structure set up for long-term growth

Mandy keeps full control- as opposed to a merger

The growth is organic and inline with strategy

Professional advice and monitoring

Time required to find the right management

Loss of decision making control

Potential loss of corporate culture

Loss of morale

Higher admin. costs

Option 5: RecommendedIncreasing HR focus

• Bring structure to Mandy’s employee goals.• Expand training and development programs• Monitor manager-employee relationships

– Goal setting– Performance – Mentoring

Option 5: Recommended

Increase HR FocusPros Cons

Supporting company goals

Increased relational returns

Less burden on Mandy

Increased internal recruitment capability

Initial capital Investment

Less decision making control from CEO

Risk of “formal” system

Recommendation

New Organizational Structure&

Increase HR Focus

Amanda CabotCEO

Peter KjellerupExecutive VP

Philomena CurryCOO

Mark DiehlSenior VP/sales

Mitch Meyer IT Director

Gwen LivingstonHR Director

Marc Vettori C/S Manager

Brenda ZurlHR Admin

Danielle AlpaughSales Coordinator

Catherine ByersMktg & COMM

Mgr.

Martha RyanOnLine Bus. Mgr.

Christian SheaMktg. Dev. Mgr.

LeAnne McComsey

PD Manager

PD Coordinator

Wendy ConvingtonCredit & Coll.

Manager

Web Author

Tim LewisNetwork

Coordinator

Navision Programmer

Kim Dunn Warehouse Mgr.

Retail Outlet Staff

Inventory Buyers

QC supervisor

Implementation

Matilda MullinFinance (AP)

Manager

Amanda CabotPresident

Mitch Meyer IT Manager

Marc Vettori C/S Manager

Brenda ZurlHR Admin

Danielle AlpaughSales Coordinator

Catherine ByersMktg & COMM

Mgr.

Martha RyanOnLine Bus. Mgr.

Christian SheaMktg. Dev. Mgr.

LeAnne McComseyPD Manager

PD Coordinator

Wendy ConvingtonCredit & Coll.

Manager

Web Author

Tim LewisNetwork

Coordinator

Navision Programmer

Kim Dunn Warehouse Mgr.

Retail Outlet Staff

Inventory Buyers

QC supervisor

Gwen LivingstonHR Director

Mark DiehlMarketing /Sales

Director

Philomena CurryOperations

Director

FinanceDirector

Sales ManagerMatilda MullinFinance (AP)

Manager

Peter KjellerupExecutive VP

Training and DevelopmentCoordinator

ImplementationIncrease HR focus

• Training

• Development

• Relational returns of employees

Questions?