Download - Carona Shoes
Group 2Name Roll No
Mayur Bhat 2
Tushar kambli 6
Yogesh Redkar 10
Manish Tripathi 14
Brand Failures: Carona Shoes
Carona Ltd: Company ProfileEarlier called as “Carona Sahu
Company”In 1984, the company was acquired
by Khataus and the name was changed to “Carona ltd”
Key Executives◦Mahendra K Khatau , Chairman ◦Anil K Khatau , Managing Director ◦P R Ruparel , Director ◦A K Basu , Director
Operations and competenciesThe company used to manufacture
canvas /rubber footwear of all kinds.Manufacturing facilities in Mumbai,
Aurangabad and AhmedabadStrong distribution network across the
countryThe company’s strategy was to cater
mass market with a price range of 50 to 400
It became the second largest footwear company in India
Technical Agreement with Puma
With giants like Nike, Reebok, Adidas entering Indian Market, in 1989, the company entered into a technical agreement with Puma AG Rudolf Dassler Sport, Germany, to manufacture sports and special application shoes.
Public issue in Jun 1989 to set up a unit in Aurangabad to manufacture the sports shoes
Downturn of Carona1995, there was a reshuffle in the
management because of a split in the Khatau family
Strong competition from unorganized sector for rubber and canvas footwear
In 1995, it disposed off its Mumbai (Jogeshwari) plant where operations were partially suspended since Mar 1994. 800 of its 1200 workers were relieved through a VRS scheme
1999, the company was registered as a sick company under SICA (Sick Industrial Companies Act) 1985
Contd..In 2003, BIFR (Board for
Industrial & Financial Reconstruction), while noting that the promoters of ailing Carona Ltd are not serious in rehabilitating the company nor are they resourceful enough to mobilize the funds required for this purpose, confirmed its prima facie opinion of winding up the company.
Reasons For Carona’s failureHead on competition with BataNew launches by Bata to cater
high end segments :
Contd…Carona counteracted by a
technical agreement with Puma
Trouble: Wrong Market to EnterThe Segment was not sizable for a company
like Carona (constituted a mere 5 to 10 per cent of the footwear market in India)
It did not gel with their distinctive competenceIt could not provide the volumes that Carona
was used to at the mass endIt couldn’t give high volume essential for
Carona for having a healthy bottom line. Misdirection: Top end of the market suddenly
became the main focus of the company and it forgot its bread-and-butter shoes that had given the company its identity
Wrong pricing StrategyPreliminary market research done by
Carona indicated that the top-of-mind brands were Nike and Reebok.
Adidas came on promptly, while Puma figured almost nowhere.
Carona took the plunge nevertheless with a shoe priced at Rs 600.
This was considerably higher than Bata's Power which, retailing between Rs 200-300, defined the market.
Contd…The company felt that the Indian consumers
will fall for the global brand.The consumer, who had little brand recall for
Puma, saw no justification in paying a premium for an ordinary product.
The bottom line: Puma was a big flop in the Indian market because of wrong pricing.
Thus, ‘A brand success or failure depends to a large extent on price. But price is really dependent on both product and positioning. At the end of the day, you have to give value for money.’
Competition at both the endsAt the lower end, smaller competitors
attacked its mass range in canvas shoes, school shoes and Hawaii chappals
Brands like Liberty, Action, Lakhani etc began to corner the market with new designs and fashion.
Foreign brands like Nike, Reebok and Adidas began to market aggressively which further worsened the position of Carona.
Contd…The environment changed drastically during
late 90's with the market opening up. All the footwear companies faced the issue of tough competition and increased costs. The cost was primarily attributed to the heavy workforce that these companies had.
Bata was able to sustain itself by launching new models at affordable price ranges. But Carona was not able to excite the market with new launches.
Somewhere the company lost its control over the costs. It failed to understand the competition and respond to it.
Measures Taken by ManagementIn 1997 Carona Ltd management came
up with an idea of an infusion into its equity
The promoters were looking out for prospective buyers for their stake
At the same time Carona was also looking at strategic alliances for its distribution network as well as its brand.
Had a little success in finding a suitable strategic partner.
Cashing the Brand valueCarona was looking at cashing on its
brand value to bring in much needed funds into the company, the aim was to increase the product line.
Carona had offered to sell out its distribution network but was not willing to shed its equity.
At that point of time, a few companies including Liberty Shoes had held discussions with Carona.
Contd…The company could have found a
buyer for its equity at an earlier point of time. But in 1997 it wasn’t possible, more so since the market had got crowded and the value of the Carona brand had eroded considerably over the years with several other brands coming into the market.
Indian Footwear market*India’s domestic footwear market is
estimated to be over Rs 15,000 crore in value terms and has grown at the rate of 8.8% over the last couple of years
While men's footwear is the biggest target category (contributing almost 48%), children's (11%) and women's lifestyle footwear (41%) is not behind in the race.
About 37.8 percent of Footwear retail is the organized segment, which qualifies it as the second most organized retail category in India, next only to Watches.
Economic factorsThe average spend on the footwear by
urban consumers is Rs 240/annum, Consumers in rural areas spend just
about Rs 100/annum. The annual domestic consumption of
footwear is approximately 1.1 billion pairs per annum, and top 20 cities contribute about 450 Million pairs/annum.
Major part of the demand is met by the unorganized sector
Customer Segments
Segment wise classification of price ranges in the men’s footwear segments
Segments Price Ranges in Rs % of growth
Mass market 185 – 700 60% (Liberty Bata)
Economy market 700- 1000 30% (Bata Liberty)
Sports market 1000 – 3000 7% (Nike Adidas)
Premium leathers 3000- 5000 5% (Charles and Keith)
Luxury 10000- 50000 1% (Gucci Louis Vuitton)
Contd..
Segment wise classification of women footwear segment:
Segments Price Ranges in Rs % of growth
Traditional footwear 699 – 999 5%
Designer Footwear 599 – 799 10%
Formals 299 – 699 40%
Casual Wear 499 – 799 25%
Sports Shoes 500- 699 20%
Contd..The kid’s footwear segment is one of the
fastest growing segments in India. The Indian kid’s footwear segment is
highly fragmented and dominated by the unorganized sector.
The branded kid’s footwear segment has a big card to play as India has the world’s largest child population.
The overall kid’s segment has a robust margin of 20 – 25 % which is huge potential opportunities for branded footwear players.
Strategies for Revival of Carona:
Cost management and effective marketing are key to survivors in domestic markets.
Determinants of Carona’s success can be,◦a) Location ◦b) Product focus◦c) Enterprise-wide IT ◦d) Pricing model
Explanation in briefLocation:
◦High street selling with Multi brand outlets and exclusive franchisees.
◦Advantages: Avg cost/sq feet = 40% of malls Higher footfalls of a particular segment Responding to trends and fashion
becomes easy
Segments Price Ranges in Rs % of growth
Mass market 185 – 700 60% (Liberty Bata)
Economy market 700- 1000 30% (Bata Liberty)
Sports market 1000 – 3000 7% (Nike Adidas)
Premium leathers 3000- 5000 5% (Charles and Keith)
Luxury 10000- 50000 1% (Gucci Louis Vuitton)
Product Focus
Contd…
Since Carona’s core competency was to manufacture rubber and canvas shoes, it can also enter into the kid’s school shoes segment which is largely dominated by local players.
Segments Price Ranges in Rs % of growth
Traditional footwear 699 – 999 5%
Designer Footwear 599 – 799 10%
Formals 299 – 699 40%
Casual Wear 499 – 799 25%
Sports Shoes 500- 699 20%
Scaling Up
Contd…Enterprise-wide IT Carona should also look for IT
investments such as POS and ERP. It can use IT to understand the models of the seasons, price ranges, store performance, etc.
Pricing model Floor pricing should be used to
penetrate into markets, premium pricing can be targeted towards the middle high and high income group people.