subject: Ghd Hairs Investments In Design Of Uppers Were Diverted Towards Research [print this page] Other complementarities
Geox conceived of the shoe sole as a technology platform, common to diverse shoe styles and types, and therefore created incentives to configure its operations and supply chain differently from its competitors. Thus, product innovation and supply chain configuration complement and reinforce each other, thus generating increasing returns to scale. (http://www.ghd-hairs-online.com/ghd-mk4-pink-p-1.html)
Geoxs unique product technology led to a manufacturing process that is largely conducted in-house (though not in Italy), almost fully automated with proprietary process know-how, and concentrated in a few locations (e.g. Timisoara). The product characteristics and the need to protect the know-how from imitation complements the supply chain decisions to achieve a large fraction of target production volumes through: a) a large, fully owned plant in Romania (Timisoara); and b) a long term, comprehensive alliance with a Chinese footwear giant (Aokang).
Global outsourcing, as conventionally conceived and generally used in the footwear industry, is limited in volumes, confined to upper construction and sole bonding, and concentrated on the low end of the product range. Similarly, the choice of targeting a large customer base complements the supply chain strategy, creating otherwise unimaginable economies of scale. Indeed, these three choices are also complementary with the affordable price strategy. Lower unit production costs, related to unique product/process technologies, and large volumes, related to a wide product range and large customer base, allow the setting of affordable prices. But affordable prices favor the expansion of the market, thus reinforcing the positive effects of the other activities. indivisibilities and decreasing returns to scale by a fixed factor. Uncertainty and complementarity lead to increasing returns in durability which leads to the decline in long-run average costs.
Conversely, Geoxs choice to adopt a fast follower strategy in style and design is complementary. Thanks to this choice, risky investments in design of uppers were diverted towards research and development in sole technology, materials and manufacturing processes. If Geox had not made that decision, its R&D investments would have been too fragmented and diluted to generate returns. Furthermore, the choice to serve a wide customer base and to offer a variety of product lines and styles reinforces (in the sense that it makes more attractive and effective) the decision to set up a retail network under the Geox brand. Indeed, the transversal nature of Geoxs offer makes it possible to have single-brand stores that sell a full range of products at affordable prices to a wide section of the general public. (www.fad77.com).
Analogously, the choice to invest in a proprietary retail network benefits from the marketing investment, in the sense that massive advertising and communication investments make investment in Geox retail stores even more attractive. Finally, comprehensive advertising complements the product innovation and product range strategies. Investment in communication builds customers awareness about the unique aspects of Geox shoes, thus reinforcing the product innovation strategy. At the same time, however, offering a wide variety of styles to a wide section of the general public increases the potential returns to investment in advertising.
For the sake of brevity, in this study we have reported only a selection of the complementarities we found during our fieldwork. We found many others in different functional areas like human resource management (with the Geox School providing technical and managerial training to young talents), the management of information technology, finance and accounting.
by: little coco
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