Crocs vertical integration

Crocs: Global Considerations

Overview: Supply Chain

· Highly flexible supply chain enables the company to build additional products to fulfill new order quantities within the selling season

· Able to keep up with high demand

· Previously unheard of in footwear industry

· Developed a model focused on customer needs-when a customer needed more product, they would get it

How Crocs went global

· Launched worldwide at entry point in companies life because larger show/apparel companies could knock them off (first-mover competitive advantage)

· Other companies could have gone into Europe before Crocs got there if they had infrastructure in Europe

· In every country before everyone else, able to ship product into other countries

· Known as “originals”, there were knock offs

· Partnerships in trade shows in every industry

· Went to worldwide events

· Crocs had its own sales staff in other countries

· 2005 started production in China, using large contract manufacturer

Developing Global Supply Chain

· Started production in China in early 2005

· Raw material sent to Italy for compounding

· Then sent to China and Canada

· I suggest keeping 3rd party manufacturing in China and other Asian countries (b/c very flexible and able to produce high volume)

· Also keep company owned manufacturers in Mexico, Italy and India

· Crocs owned molding equipment/molds

· Uses country provided labor

· In 2006 Crocs took control of compounding activity with state of art compounding facilities in Canada, China, and Mexico (Got rid of bottleneck of having compounding done in Italy which led to supply chain inefficiencies-material had to be sent from Italy to each production site, in the correct amounts and colors)

· Also added warehouse operations to each factory, large orders could now be shipped directly from Chinese warehouse

Questions to ask

1. Should is vertically integrate or grow through product line extension? Vertical integration. Expand business into different points, supplier and distributor. Helps reduce cost and improve efficiency

2. Should it grow organically or through acquisition?Organically. No need to buy other companies. Already have production companies in other countries.

3. Would potential growth paths exploit Crocs’ core competencies or defocus them? Not at all.

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