Essential Footwear: A Strategic Analysis using PESTLE and Porter's Five Forces Model

This article provides a strategic analysis of Essential Footwear using PESTLE and Porter's Five Forces Model. It covers the company's mission, vision, values, and corporate objectives. It also discusses the macro and meso environment factors affecting the company's performance.

Business Strategy

EXECUTIVE SUMMARY
Essential Footwear is mainly deal with the footwear products for athletes and by
conducting the simulation game, it has been identified that the company is actually performing
good because the earning per share of the business is actually increases and this causes positive
impact over the business performance. It has been identified from the analyses of all six round is
that year 2015 is a stood out year because in this the stock price of company is highest. The
strategic framework has also determined that for macro environment factor, only Pestle analysis
has been used and for Meso, Porter five force model has used which indicate that company
should improve the business performance. Through micro environment factor, it has been
examined through SWOT analysis that there is a need to focus upon the threat and opportunities
that helps to create a better outcome.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
Mission........................................................................................................................................4
Vision...........................................................................................................................................4
Values..........................................................................................................................................4
Corporate objectives....................................................................................................................5
1...................................................................................................................................................6
2. Reflection on relevant theoretical framework to understand company’s internal, external
and competitive environment of a business.................................................................................8
3. Impact of using specific emerging technology on the future business along with
recommendations.......................................................................................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16

INTRODUCTION
Mission
The mission of the company is to provide a best footwear product to the company in
order to improve the business performance.
As per the financial results generated, it has been identified that the company is in
progress and that is why, it helps to create a better outcome and improve the brand image of a
firm as well.
Vision
The vision of the company is to be a leader in the footwear industry in order to provide a
better footwear to athletes.
As per the results generated under the simulation game, it has been identified that the
vision of the company can be attained and it will be beneficial for the business only when the
same strategy has been performed so long by implementing minimal efforts.
Values
There are different values on which the is based upon which are as mentioned below:
 We lead by an examples
 We work together to fulfill the need of the company
 We are open and honest in a communication to perform the best results.
 We act with integrity in order to improve the business performance and react on the
same.
 We seek facts and provide insight so that effective outcome can be generated.
 Working closely with the social responsibility in which company seek to provide better
facilities to the society.

With the help of such values, company can improve the overall performance and present the
same to the employees so that the brand image can be generated.
Corporate objectives
There are three main corporative objectives that has designed on the basis of its financial
performance, which are as mentioned below:
 To increase the earning per share of the company by 10% within next 3 years because it
has been increased from year 13 to year 15.
 To raise the stock per price by 6% within next 6 months because the same has been
identified from year 13 to 15 in order to increase the market share.
 There has decrease in the labor cost of the company from last 3 years and that is why,
hiring human resource to implement the things will be better. This shows that company
need to improve the overall performance by implementing the things effectively.

1.
Essential footwear is a company that manufacture and sales of athletic footwear. The
company has made different decision based on the year-on-year performance over the period of
six years. The main objective of essential footwear company is to maximize the earnings per
share, return on equity and productivity of company along with the reduction in the labour cost.
On this basis, the following decision has been made over the six years in order to achieve the
corporate objectives of company (Narkunienė and Ulbinaitė, 2018).
In the first year i.e., 2010, the earning per share and net revenue of essential footwear
company was $2.00 and $432646. In this year, to achieve the corporate objectives of the
company, the decision regarding the investment in efficient technology and training has been
made. For example, in the first year, essential footwear company has made decision to invest in
internet to increase net revenue (Fujianti, 2018). Further, the company have made decision NA
and AP brand footwear or shoes to achieve the corporate objective of increase net revenue.
Moreover, in the second year 2011, it is analysed from the outcome that the productivity
of NA brand has increased to $5024 from $5000 in year 2010. This is basically the result of
decision made in the previous year. However, despite positive impact there was also a negative
impact of previous year decision on the labour cost of the company. It means in the year 2011
the labour cost has increased from 8.98 to 9.21 (Iskamto and et.al., 2021). The further decision in
this respect has been made by essential footwear company such as provide training to staffs in
order to achieve the corporate objective of minimizing labour cost. This decision is basically
taken by the company in response to the lesson learnt from previous round where labour cost and
production cost both has reduced with the increase in productivity of NA and AP.
On the basis of the decision made in the year 2011, it is analysed that the return on equity
of essential footwear company has reduced to 25.8% in the year 2012. But on the other hand, the
labour cost of NA and AP has reduced to 8.70 and 4.84 in the third round as compared to second
round. The impact of which the corporate objective of the company to reduce or minimize labour
cost has achieved. Various changes has been viewed and analysed over the period of six years
which and on the basis of which decisions have been made in order to achieve corporate
objectives. However, beside of increase in EPS, this strategic decision of essential footwear
company has also create negative result of company in the term of increase labour cost and

decrease return on equity. The strategic decision taken in the year 2012 is to start new brand
production such as EA. This decision is taken in order to increase the earning per share and
reduce labour cost of the company. The outcome of this decision made in the year 2012 in the
year 2013 is that the earning per share of the company has enhanced to $4.57. However, on the
other hand, the negative outcome of this decision is that in the year 2013 the labour cost of NA
and AP has further increased (Ginesti, Caldarelli and Zampella, 2018).
In the year 2013, the strategic decision taken by essential footwear company is to further
start new brand footwear production such as LA. The reason behind making this decision by
essential footwear company is to achieve the corporate objective of increasing earning per share.
Because of the production of LA in the year 2013, the earning per share of company have
increased to $4.57 as compared to previous year (Sardo, Serrasqueiro and Alves, 2018). Not only
that, the outcome of the decision made by essential footwear company has also resulted into the
reduction in the labour cost. It is because the labour cost of LA, EA and AP has reduced in the
year 2013 as compared to previous year. However, on the other hand, the outcome of decision
made in the year 2013 has result into the stable return on equity which further creating issue for
the company in the achievement corporate objective of ROE.
There is basically no new strategic decision has been made by essential footwear
company in the fifth round (2014 year) and sixth round (2015 year). It is because after he
strategic decision made by essential footwear company in the year 2013, the earning per share,
return on equity has increased drastically while on the other hand the labour cost has started
minimizing. In this way, it can be said that the most crucial and significant decision made by
company which has helped the organization in achievement of their corporate objectives is LA
production in the year 2013.
On the basis of analysis of each round, it is identified that the round which stood out is
year 2015. It is because in the year 2015 the earning per share as well as return on equity of the
company has drastically increased to $8.59 and 34.2% respectively. The overall performance of
the company in the round 2015 was quite high as compared to all other round because credit
rating and image rating is also A and 87 respectively (Sunardi, Husain and Kadim, 2020). Not
only that, in the year 2015 the labour cost of branded production has reduced and productivity is
highest. The lesson learnt in this year is that the strategic decision of essential footwear company

such as new LA brand production has the best way to enhance the earning per share and stock
price of company shares. It is because in this round the stock price of company shares is highest
among all other rounds i.e., $185.46.
In this round the production capacity of all the footwear products has been increased but
on the other side the key lesson learnt in this round is that the market share percentage of
different brand has been decreased. For example, in the year 2015, the market share of NA
internet and wholesale has been reduced to 11.2% and 14% as compared to 14.8% and 15.1%
respectively in the previous year (Ginesti, Caldarelli and Zampella, 2018). It is learnt from this
event that it is not necessary that with the increase in earning per share of the company the
market share of each brand of company increases. Basically, the overall performance of essential
footwear company is high in the year 2015 thus this round is considered as stood out round.
2. Reflection on relevant theoretical framework to understand company’s internal, external and
competitive environment of a business
Macro environment Factor: In order to determine the macro environment factor, Pestle
analysis has been used which is as mentioned below:

Political factor: There is a strong presence of the footwear industry in different locations
and company need to analyse the political stability of the company before entering into new
market (Castañeda-Ayarza and Godoi, 2021). This might include tax rates, Brexit that might
affect the business into negative manner. Essential Footwear also determine the factors that
might affect the business into negative manner.
Economic factor: This factor involves economic situation of the country that affect the
business performance in to negative manner. Essential Footwear should consider the inflation
and recession rate within its business to ensure that such outer factor do not affect the business.
As, per the growth of the company’s performance in its financial stability, it has been analysed
that its earning per share is increases that reflect company evaluating factors while making
decision.
Social factor: By analyzing the demand of the customers, the quoted firm also introduce
new shows that helps to attract the athletes like NA, E-A. Therefore, it can be stated that by

using its own tagline, company can easily generate the best brand image and improve the
business performance as well (Laverty and et.al., 2018).
Technological factor: Focusing upon advance technology and implement the same into a
business will help a company to survive better. Such that under the branded operations, company
start offering products through Internet and this in turn assist to create a better outcome (Mansuy
and et.al., 2019). Therefore, it is clearly indicated that adopting new technology will be
beneficial for the company.
Legal factor: There is a need to comply the legal laws while introducing new brand
which include customer act, employment act so that company can raise the brand image and
offer the best variety of products as well.
Environment factor: There is a need to use the raw material for shoes should be eco-
friendly (Zafar and Kantola, 2019). This in turn assist to create a better outcome and improve the
business performance so that effective outcome can be generated.
Meso environment factor: For understanding meso environment factor, Porter five force model
is used that clearly identify the factors that affected the competitive environment.

Bargaining power of suppliers (low): The raw material used in this industry is of high
quality and that is why, the switching between suppliers is quite high and power is low because
suppliers have to work according to the norms and standard governed by the big players of the
industry (Li, 2022).
Bargaining power of buyers (high): Buyers have an access to the products via online
shopping but the big players are dominating in nature which cannot be neglected and that is why,
they offer high quality products that affect the small firm. This attract buyers towards it and
create a direct impact over their purchasing power.
Competition of rivalries (high): There is a strong competition in this industry because the
big players always offer the products by identify the need of the customers that assist to gain

high competition. That is why, it assist to increase the competition and improve the business
performance.
Threat of substitutes (low): There is a very low threat of substitution because the shoes
preference cannot be replaced by anyone among athletes (Bagaskara and Lupiyoadi, 2020). That
is why, Essential Footwear need to understand that demand of customers and then implement
accordingly.
Threat of new entrants (high): There is a huge investment require in order to enter in this
industry and that is why, not everyone afford the same. That is why, the chances of survive in
this industry is not so good but most of the company wants to invest within this because it
provide a high return (Juliana and Nyoman, 2019). Also, it can be stated that due to high cost
advertising and marketing cost, amount spend in R&D affect the business into negative manner
and decreases the chances of entrance.
Micro Environmental factor: In order to examine internal environment of the company, SWOT
analysis has been used which is as described below:
Strength: The strength of the company is its increasing earning per share from last three
years. Also, the company have an ability to raise the stock price and that is why, it assist to
increase the brand image of the company at global level. Further, the net revenue of the company
also keep increases from year to year which assist to generate a better outcome and improve the
brand image at global level (IBRAHIM, NURROCHMAT and MAULANA, 2019).

Weakness: The company’s productivity for different products will decreases by year to
year and that is why, it affect the productivity of the company into negative manner. Also, it has
been identified that company should focus upon the ways through which the production factors
can be improved so that effective outcome can be generated effectually.
Opportunities: As per the lower down rate of the company’s products it has been
analyzed that there is a need to focus upon the products and implement the ways through which
the company can generate an effective ways. Like, offering the products as per the demand of
customers ensure to improve the brand image.
Threats: Essential Footwear further faces threats related to the decreasing productivity
cost within the company and this causes negative impact over the business performance
(Dandan, 2020). Further, to minimize the same, there is a need to improve the brand image of the
company and raise the performance as well. This help to create a better outcome and reduce the
threat as well.
3. Impact of using specific emerging technology on the future business along with
recommendations
Emerging technologies include the variety of technologies that assist the company to
improve its development and it is mainly describe new technology but helps to raise the business
performance. For the Essentials Footwear, managers can focus upon different technologies in
order to improve the business performance which includes robotics, AI, cloud based
technologies, 3-D technology etc. As per the current trend, it has been identified that 3D
technologies will be more suitable emerging technology used by the company in order to
improve the business performance. Such that with the help of 3D printers, company can greatly
facilitated different designs and increase the manufacturing process. Apart from this, this
emerging technology is used to a large extent for the development of prototypes in order to
validate the design. That is why, it can be stated that this technology is beneficial for the
company to increase its sales and raise the market share as well.

With the help of this emerging technology, company can increase the strength and
flexibility in order to provide a maximum comfort for the sports shoes. Therefore, there will be
positive impact identified by using this technology which in turn allow the production of
complex structure that assist to absorb the shock within athletics by making the shoe lighter as
compared to others. Hence, it has been identified that the 3D technology has been using in many
of the companies which assist to increase the sales and market share of an industry. Also, it has
been identified that 3D technology assist Essential Footwear to be creative and provide best
designs to improve the market share.
Also, it is to be suggested to the managers of footwear industry in order to take an
advantage of the opportunities so that it will be beneficial for the company to understand the new
trend and implement the same into the business. This will be beneficial for the company to
increase the overall performance, along with this, managers should also focus upon the ways
through which employees can be motivated and this causes positive impact over the business
performance. Therefore, it has been identified that through different ways, Essential Footwear
can improve the business performance and attract the customers towards it. Moreover, company
can also uses 3D technology in order to provide the best creative footwear so that effective
outcome can be generated. In the same way, Essential Footwear can easily meet the defined aim
of a company by focusing upon the different company’s innovative products. Overall, it has been
also suggested that company’s managers need to implement another technology that assist to
improve the business operations so that effective outcome can be generated.
CONCLUSION
After summing up the above information, it has been summarized that the stood out
round for essential footwear company is sixth i.e., year 2015. It is because in this year, Essential
Footwear company has reached to its highest rank i.e., rank 3. Also, the change in score of
company as compared to its investor expectation is positive in year 2015. It is because till year
2013, the company score is negative while in the year 2014 and 2015, the change in score is
positive 2 and 7 which indicate that company have able to manage business performance as
compared to investors expectations. Further, it is also analysed that the reason behind the stood
out year of 2015 is that in this year the earning per share of company is highest $8.59. Lastly, it

is also analysed that the company able to achieve its corporate objective of increasing return on
equity and reducing labour cost of the business.

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