Tom’s Shoes: SWOT Analysis

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Abstract

In today’s highly competitive markets which are inundated with similar goods and services, the need for products or services that stand out in the market place is critical. Many companies are investing a lot of resources in product development and exploration of new markets, while others engage in price competition in a bid to secure and retain customers. Most of these marketing strategies are expensive while they do not provide guaranteed long term success. Innovative marketing specialists have discovered that corporate social marketing activities can guarantee long term success of the Company.

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Case Study: Tom’s Shoes

Introduction

Corporate social marketing activities are all activities that are directed to benefit the customer and involve sharing of resources such as money, expertise or time which are not expected to directly result to profit but rather aimed to increase the number of customers doing business with the (Mullen, 1977; Carpenter, Bauer and Erdogan, 2010). Therefore, the primary goal of corporate social marketing is to give back to the community while at the same time attract customers who wish to contribute to a worthy cause through their purchasing. The use of scarce resources of a company to any cause other than the maximization of shareholders wealth has been criticized in the past. Milton Friedman for instance is renowned ardent critic of the idea of companies engaging in social welfare activities saying that “the responsibility of companies to the society is to generate maximum profits” (Friedman, 1970). However, empirical studies have shown that engaging in corporate marketing activities has a positive effect on the image of a Company since it can increase sales turnover and market share thereby enhancing its long term sustainability (Angelidus and Ibrahim, 1993: Porter and Kramer, 2006).

Corporate social marketing also enables a company to minimize government regulation and scrutiny. According to Michael Porter, the four main reasons why companies engage in corporate marketing activities are; because it is an ethical obligation, it guarantees sustainability, provides the Company with mandate to do business and finally it enhances the reputation of the company (Porter and Kramer, 2006).

TOMS shoes is a company that was founded in 2006, with the aim of giving back to the less fortunate in the society as much as possible using their customers as the drivers of this vision. The company has effectively infused corporate marketing strategies into its business strategies by tying the company products with charitable causes (Ptacek and Salazar, 1997). Because of this Tom’s shoes has successfully and effectively created a strong and respected brand name, successfully increased its profits while at the same time providing much needed assistance to needy people around the world. This paper seeks to analyze how TOM’s shoes developed this strategy as a response to the environmental forces facing it and whether the strategy has been effective in achieving its intended goals and objectives.

TOMS Shoes: One for One Movement

TOMS shoes was started five years ago by Blake Mykoskie shortly after returning from a trip in Argentina where he realized that many children did not have shoes to wear and were suffering from the vagaries of weather, pests and diseases which affected their education. He decided to use his skills as an entrepreneur by establishing a company whose concept was to give a new pair of shoes to a poor child somewhere in the world for each pair of shoe his company sold. Since then the concept has been effective and has been able to donate over 200,000 pair of shoes to the poor.

TOMS shoes is an example of a successful corporate social marketing activity where a company has invested money in a project whose primary aim is to satisfy an existing social need (Angelidus and Ibrahim, 1993). Currently this method has become increasingly popular as business strategy because it attracts a lot of publicity to the company and its product (Porter and Kramer, 2006).

If a company carefully selects its corporate social marketing strategy there is evidence that it can become a big source of innovation and attain a competitive edge that it requires to become successful in the industry (Porter and Kramer, 2006). Indeed, corporate social marketing strategy leads to increased benefit to both the society and to the company and this fact is well demonstrated by TOM’s shoe Company in the way they have implemented this strategy.

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Strength Weakness
  1. Strong Corporate image, Trusted brand,
1. Lack of financial resources
  1. Company is respected and loved.
2. Lack of highly skilled staff
  1. Well designed stylish product which have beed defined as cool
3. Limited distribution network in the USA
  1. Strong Brand Loyalty
4. Overdependence on people to drive its strategy
  1. Youth are brand ambassadors
5. Lack of verifiable records of achievement of the program
  1. Competitive shoe prices, matches other canvas shoes at lower price.
6. Lack of performance standards of CSR activities
  1. Fulfillment of its original goal to help the poor
Opportunity Threat
1. Globalization 1. Competitors can adopt the strategy
2. Potential of the internet especially social media 2. Skepticism by majority of customers(Webb and Mohr, 1998)
3. The TOMS youth movement advocacy potential 3. Entry of new players who may be more organized, resourced
4. Organizational Development- expansion 4. Long term sustainability not guaranteed
5. The youth market is big and is growing
6. The Company have an opportunity to diversify into women or older people market

Trends in the marketing environment that have Driven TOMS shoes Strategy

Kotler and Amstrong define the marketing environment as “all the actors and forces outside marketing that could affect marketing management ability to build and maintain successful relationships with the target market” (2010). The environment consists of forces which has some level of influence over business activities which are referred as the microenvironment as well as other wider societal forces which are called the macroenvironments which have very subtle influence on businesses. Marketing environment is important as it defines the way companies do business. The trends in the marketing environment that have contributed to the success of TOMS shoes are several and include the following.

One is the need for sustainable business practices that focuses less on maximizing profits but more on ethical and friendly ways of conducting business. Currently, the governments, civil society and customers are more concerned on the processes that companies use to do business and are increasingly demanding for environmental and social friendly ways of conducting business. It is because of this that triple bottom line reporting technique is being adopted by the stakeholders whereby companies report not just profits and asset growth but also the social and environmental impact of their business operations.

Secondly, increased competition is causing many companies to seek new ways to differentiate their products and effectively position their products and services to the customers. Corporate social marketing activities are able to give Companies the competitive advantage they need because this strategy serves to create and increase value to customers (Collins, 1993). In similar way, TOMS shoes has succeeded to connect its customers to a worthy cause successfully.

Third, the role of publics such as youth groups, the media, government and the general public are forcing companies to engage in corporate social marketing activities which they undertake by directly or indirectly initiating such activities. In the case of TOM’s shoes, the youth are part of the Company’s strong advocacy of its products. In addition, the positive opinion of publics contributes immensely to its profitability, brand image and long term prospects.

Fourth, demographic changes that have occurred in recent years have created an opportunity for TOM’s shoes to operate and thrive. Most of the youth have grown up fast, but have not had an opportunity to engage in charity work directly. Unlike their parents who gave through churches or organizations such as World Vision, CARE and Oxfam, the youth want to be engaged directly where they can see tangible and immediate results. TOM’s shoes organize for youths to participate in charity work through buying the products and in the actual distribution activities. The company for instance organizes for trips to different destinations around the world every two weeks for about 300 youths to give out shoes. The other benefit of this strategy is that the youth later becomes strong ambassadors for the company products when they return from such trips.

Fifth, internet, media and social networking sites have provided TOM’s shoes with an opportunity to involve many people in its activities. Currently, the company is present in all major social networking sites such as Facebook, MySpace and Twitter; it also communicates through TV and radio with its target group, this is besides having a further reach of its customers through other media channels.

Sixth, from an economical viewpoint the market segment that the Company target is able to afford the shoes and thereby further the charitable cause of the Company. This is because the US economy is generally strong and the people have higher purchasing power and can afford to pay a premium price for a worthy cause. There is also a wide gap between the wealthy and the poor; the poor people especially in the third world cannot afford to buy even basic goods, thus, TOM’s shoes connects the able and the needy through its business concept.

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Finally, social cultural views towards charity have changed today and more and more wealthy and financially able people see giving as the right thing to do. The result is that people are increasingly being involved in giving to the less fortunate as opposed to having much in their life because of the shift toward quality in life as opposed to quantity.

Did the company first scan the marketing environment in creating its strategy or did the company develop the strategy and fit the strategy to the environment?

Environmental scanning is the process of gathering vital information that is used to guide the strategic planning process (Amstrong and Kotler, 2010). It is clear from the case study that TOM’s shoes did scan the environment which guided its marketing plan. This is seen in the following strategic decisions.

Operating Model: The founder had to consider between a full charity organization to be supported by donors or an entrepreneurial business model to carry out his goal of helping the needy. After considering each, he adopted the business model, which involves ordinary people giving helping the less needy in fairly simple and sustainable manner.

Target market: The founder realized that the young people had been neglected in charity activities and that they were yearning for a meaningful and engaging work of doing this which had direct impact. The Company finally settled on the young people as the market that it would serve; this is also because of their significant in size.

Product design: The Company needed to develop an appropriate shoe product that would be attractive to the target market segment. The company found out that canvas shoes were popular with the youth. The company then set out to develop a well designed stylish shoe product which has been described as being “cool”.

Pricing: The Company had to determine the appropriate price for its range of shoe products that would be competitive enough to stimulate demand while at the same time cover for the additional cost of the welfare project of the company. The company settled for a price that is similar to other such canvas shoes so as to remain competitive. The Company thereby opted not to increase its price but instead chose to achieve lower level of profitability compared to its competitors.

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The role of the youth: The Company targeted the young people because they would form the movement that would drive the charity work in schools, campuses and at homes. The youth would become ambassadors, advocates and marketers for the product and its agenda.

Importance of Market Scanning

It is important that a company scan its operating environment before designing its strategy because environmental forces are powerful and they influence the way a company does its business (Amstrong and Kotler, 2010). For example, the rules and regulation that governs business activities which a company has to abide to are dictated by the laws and regulations that govern the Companies in each industry; these laws are known through the process of environmental scanning. It then prepares itself to operate within that environment while abiding with those regulations.

Competition is part of the environment, companies have to assess the level of competition and design good marketing strategies that will enable them to achieve and sustain its competitive edge. Scanning the environment is also important because it is from this information that the company develops into a market oriented organization that is reputable. A Company that first develops a strategy then fits the environment to the strategy is inward looking and risks failure.

By scanning the environment, a company avoids making mistakes, incurring unnecessary costs by focusing directly on what needs to be done. It removes unnecessary risks and improves chances of success and survival. Marketing scanning is an important activity and it’s the first step any successful company takes.

Is TOMS strategy about serving needy children or about creating value for its customers?

The strategy adopted by TOM’s shoes is aimed at achieving both these issues simultaneously. Unlike in the past when the relationship between business and society was a zero sum game, modern thinking such as corporate social strategies has made it possible to achieve a win-win situation for everyone.

First it is clear that the company has been able to deliver value for its customers by selling to them high quality well designed, styling shoes that are described as “cool” which are sold at affordable prices. The company also gives its customers an opportunity to help someone in need directly at very little cost and effort in addition to other benefits. TOM’s shoes provide the youth with an opportunity to learn by engaging them actively and directly in the giving activities. It gives many people an opportunity to engage in activities that contributes to the sustainability and improvement of the society.

For the needy children, the company helps them by providing shoes at no cost and the children are able to go to school therefore increasing the prospects of their lives; this is the charitable vision of the TOM shoe. Thus, the product besides serving the consumers and the needy also serves the company itself by helping it achieve its goals of alleviating the suffering of the needy people in our society through sustainable giving while at the same time making a profit for the company.

Conclusion

Businesses exists primarily to make a profit, this is attained by maximizing revenues and controlling operating expenses. Nevertheless, Companies have been engaging in social welfare activities since 1800’s (Sethi, 1977); modern businesses continue to use their scarce resources in activities that deliver social welfare. In the past this has been criticized as an unnecessary wastage of shareholders wealth (Friedman, 1970). Studies have shown however that it is possible to become more profitable while engaging in social marketing activities at the same time (Mullen 1997; Collins, 1993). TOM’s shoes is a perfect example of a Company that has successfully made profits while at the same time met the needs of poor people.

References

Angelidus, J.P., & Ibrahim, N.A. 1993. Social Demand and Corporate Strategy: A Social Responsibility Model, Review of Business, 15(1): pp 7-10.

Carpenter, M., Bauer, T. & Erdogan, B. (2010). Principles of Management, Irvington, NY: Flat World Knowledge.

Collins, M. 1993. Global Corporate Philanthropy: Marketing beyond the Call of Duty, European Journal of Marketing, 27(2): pp 46-58.

Kotler, P. & Armstrong, G. (2010). Principles of Marketing. New Jersey: Pearson Education.

Milton Friedman, 1970. The Social Responsibility of Business is to Increase Profits. The New York Time Magazine, 2010.

Muller, J. 1997. Performance Based Corporate Philanthropy: How Giving Smart can further Organizations’ Goals, Public Relations Quarterly, 42(2): pp 42-48.

Ptacek, J.J. & Salazar, G. 1997. Enlightened Self Interest: Selling Business or the Benefits of Cause Related Marketing. Non Profit World, 15(4): pp 9-15.

Porter, E.M., & Kramer, M.R. 2006. Strategy and Society: The Link between Competitive Advantage and Corporate Social Responsibility. Boston, MA: Harvard.

Sethi, S.P. 1977. Advocacy, Advertising and Large Corporation, MA: Lexington Books.

Webb, J.D., & Mohr, L.A. 1998. A Typology to Customers’ Response to Cause Related Marketing: From Skeptics to Socially Concerned, Journal of Public Policy and Marketing, 17(2): pp 226-239.

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