Alternatives

Alternative 1:
Do Nothing
Hush Puppies Chile is one of the most-recognized names in the casual shoe business in the region. The company has always demonstrated a strong market orientation, making strategic decisions and taking actions to attract, satisfy, and retain customers and always provide them with the best service. Unlike the parent company which had experienced serious difficulties in the 1980s, Hush Puppies in Chile had seen profits climb and sales explode by an average of 30% per year since 1985. By emphasizing excellence in design and by developing a chain of up-scale retail shoe stores as well as an efficient factory, Hush Puppies had become the favorite brand of upper-class Chilean men. Expansion into womens and childrens shoes during the last three years had also been successfully implemented.These efforts contributed to the company's strong reputation.

The Do Nothing strategy would cost some heavy damage to the current profitability of Hush Puppies Chile and would slower the process of gaining the desired market share, or providing their product to the extent that they would have liked. This would create ample opportunity for their competitors, and other local providers to occupy greater market share.

Hush Puppies Chile being one of the giants in the industry would restrain itself from all sorts of future investment regarding:

1. Establishing New Markets. 2. Implementing Long Run Marketing Strategies 3. Implementing Strategies to Defend its Position from the Rivals 4. Market Selection and Development. 5. Being able to hire employees to maintain the level of superior performance in the future.

Pros No additional investments required No additional management or employees required Earn as much profit as possible from the current market Easier to sustain current revenues earned solely from the markets already being operated in for the time being Increased focus on existing markets save time

Cons Expected heavy loss in sales Greater loss of market shares to the rivals Significant decrease in customer loyalty and severe dissatisfaction Competitors will take advantage of the resources and utilities and get an ahead in the market Better market opportunities will go unexploited

Though the do nothing would buy ample time for Hush Puppies Chile to come up with new ideas, but the opportunity cost is very high for such strategy. In this alternative, the competitors would enjoy the markets share and simply take whatever is left out of the industry and leave residuals. Therefore, unless Hush Puppies Chile faces severe break down both financially and strategically, the Do Nothing strategy is not recommended.

Alternative 2
Hush Puppies Chile needs to explore new business opportunities through diversify internationally outside Chile and Latin America with the current resources.
Hush Puppies Chile seems to have come across some sort of market saturation point where it is being unable to increase its existing product demand in the market. Success in exports seemed likely given Chiles comparative advantage of low-cost labor and Hush Puppies Chiles excellent styling and product-development skills. In addition to being at least comparable in terms of costs, the quality and consistency of Chilean labor was generally regarded as superior to that available in neighboring countries. On the other hand, any additional export sales during the off-season would provide a better utilization of plant and equipment while minimizing fluctuations in employment levels. Second, the additional export sales volume would contribute to ever-increasing manufacturing and new product development overheads, thereby boosting overall profits.

Pros of Alternative 2:
Sales in Northern Hemisphere could potentially offset cyclical sales in the Southern Hemisphere. This means more revenues for Hush Puppies Chile. The experience Hush Puppies already have in this particular field will come in handy if they choose to take this path. It would be a shame not to pursue opportunities of expansion using the valuable experience they have acquired through time. Exposure to foreign competition will encourage increased efficiency or performance. Besides that doing business in the international market allows firms to improve the quality of their product in order to gain competitive advantage.

This process of business expansion will add new value to the companys brand and can capture new market. It would be bold move for Hush Puppies to move out of its comfort zone and into the unknown market of Europe or North America. It would indicate that they have adequate resources for this venture and the confidence to invest millions in it.

The additional export sales volume would contribute to ever-increasing manufacturing and new product development. A bigger market means more customers, increased revenue, a larger profit margin and allows the business to realize economies of scale.

Cons of Alternative 2:
Investment in a new market is always risky. There is a possibility of losses of the investment. Moreover extra investment is needed to set up processing plants for the new ventures. This money will become a bad investment if the market does not prove to prefer the services of Hush Puppies.

Exports from Chile were expected to compete with much lower cost footwear from China, India and the Philippines. But, Hush Puppies domestic target market was also the high-end segment which added design and service costs that negated many of Chiles labor cost advantages.

Strict regulatory issues from the governments of different nations regarding export-import sectors have always been a problem for companies like Hush Puppies. The firm may need to conform to new standard. Thus may require to changes such as in the production process, inputs and packaging, incurring additional cost.

Such a massive investment activity as market development outside of their comfort zone to boost market share would indicate that Hush Puppies is intimidated by competition in Chile.

It will require changes to the firms operating structure. Training/retraining of management is necessary to facilitate restricting.

Language barrier and cultural differences may create trouble for Hush Puppies.

Alternative 3:
Hush Puppies Chile should diversify domestically into other retailing concepts and pursue interest in other resources or sectors of consumer product other than shoes such as apparel or branded sport clothing.
After witnessing almost a decade of accelerating growth and profits, Hush Puppies Chile was confident to explore product development. Projections indicated that 1992 would be the best year ever for the company with after tax profits at over 15% of sales and return on equity surpassing 35%. With such growth and profitability, it was time to explore new opportunities.

Moreover, one major driving force under consideration was to move aggressively into the retailing of apparel. It was thought that the best way to proceed would be to open a chain of stores combining both Brooks and L.A. Gear athletic shoes with brand sports clothing. While the combination of athletic shoe and clothing stores had proved a major hit in Europe, Japan and North America, it had yet to be effectively pursued in Chile.

Pros of Alternative 3:
A combination outlet would have the advantage of allowing the company to move incrementally into apparel while concurrently expanding athletic shoe sales.

This move would also be compliant with its diversification strategy. Hush Puppies Chile is already in branded sports shoes so they can expand or go into branded sport clothing as well. This will be very much aligned with their existing product idea. They are already in the retail outlet business and have gained experience. It would be just investing more in it. The risks would be low compared to getting into some other unknown business areas.

Broadens the companys exposure to market swing and provides better risk control through no longer being reliant on current product.

Increased profitability through greater sales volume obtained from new product and new customers.

Cons of Alternative 3:
Investment would be needed to establish distribution channels in new markets which can be costly. Costs for retail space in a typical up-scale Santiago shopping mall were estimated at 7% of net sales with leasehold improvements averaging about $U.S. 30,000 which is quite reasonable. It also adds management cost.

Investment will be needed to create brand reputation and contacts in new markets as well. All these would just mean more costs which might lessen initial profits by a great margin. Besides, the company did not have a brand under consideration and was wondering how to aggressively proceed.

Lack of proper experience in any sector of the business can proof to be dangerous for profitability. No matter how much market research or environmental scanning is done it would never be equivalent to years of experience in any sector. Hush Puppies has this advantage in the casual shoe business but not in clothing area.

It may result in slowing growth in its core business which is casual shoe because of loosing focus.

It would require significant expanding of human and financial resources, which may detracts focus, commitment, and sustained investment in the company core industries.

Alternative 4
Hush Puppies Chile should concentrate on maintaining their leadership in Chile and the Latin American market of casual shoes for high end customers through increasing profitability and efficiency of their plants which should lead to acquiring more market share and profitability for the company in the long run.
The companys initiative in Latin America began in earnest in May of 1989 when Hush Puppies Chile began exporting Hush Puppies shoes to Uruguay. By the end of 1989, the company had sold just over 19,000 pairs of shoes in a country with a population of more than 3 million. Despite high ambitions, sales remained weak. Ricardo was convinced that Moliterno, with little experience in retailing, had chosen less than optimal retail locations. Stores were poorly maintained and Moliterno spent essentially nothing on Hush Puppies advertising and promotion. Sales were also hurt by competition from low priced footwear exported by financially strapped manufacturers in Argentina and Brazil. Therefore, Hush Puppies Chile should move to strengthen operations. Secondly Sales employees should be given additional training and new store locations are to be sought out in Uruguay, Bolivia, and Argentina.

Pros of Alternative 4:
The prestige Hush Puppies Chile has of possessing highest market share in the electricity sector in Chile and in some other Latin American countries would be lost if they are loosening their grip in this sector. Other competitors like Bata with 60% market share are already there. They would seize the opportunity to steal the market share. So by staying they retain profitability.

Hush Puppies invests millions in their ventures. Hush Puppies would not lose the amount of huge investment which they already have done in the casual and athletic shoes if they stay focused on operation of the sector. This would translate into profits for the company.

Hush Puppies Chile has enough experience in the shoe business. Lack of proper experience in any sector of the business can proof to be dangerous for profitability. No matter how much market research or environmental scanning is done it would never be equivalent to years of experience in any sector.

Cons of Alternative 4:
This strategy might mean missed opportunities in the other sectors. Opportunities of business expansion and profitability are another obvious advantage of this alternative. If they invest more in current businesses with the ongoing growth rate they are bound to get some lucrative returns. But they could have the same scope for other sectors as well. Those areas will remain unexplored.

In addition to the competitive pressures, Hush Puppies Chile felt pressured by increased competition from new American and European brands. In the ABC1 mens market, Hush Puppies was number one in market share; in the ABC1 womens market, Hush Puppies was number five in market share; and in the ABC1s childrens market, Hush Puppies was number four in market share. With these concerns in mind, Hush Puppies should begin considering other alternatives for growth.

It would be too much investment in one sector. In business it is always the best strategy not to put all the eggs in the same basket. If there is any regulatory problem in import export sector that might pose a threat to the profits earned branded shoe manufacturing companies Hush Puppies Chile would be hit hard. So to prepare for the future they should also invest in other fields.

Alternative 5:
Hush Puppies Chile should go into other Latin American market with full capacity and willingness to saturate the market with mass-market shoes rather than only premium brands. But they should not procure all their raw materials from USA or Europe. The company should seriously consider shifting manufacturing to lower cost Asian countries. We would suggest they start a facility there which can reduce their cost of production by a great margin which could lead into inspiration for lower priced shoes in the arena.
The price disparity between the local brew and the one that Hush Puppies offered was fairly steep, sometimes Shoe prices were set at a 10% premium over average shoe prices and were the same in every store.This can be very damaging to business. Products from Hush Puppies were expected to compete with much lower cost footwear from China, India and the Philippines. On the other hand, managers at Hush Puppies Chile also believed the company had no competitive advantage in importing. Estimates for 1992 were that the company would import about $U.S. 3.0 million in raw materials (mostly soles and leathers) and about $U.S. 1.7 million in finished shoes. The U.S. would supply approximately 25% of these imports with the rest coming from the Far East, Argentina, Brazil, Italy, Spain, Germany, Mexico and the U.K. So we are suggesting if Hush Puppies cannot reduce the prices they should not go into the North America or European countries. For that they should seriously consider shifting manufacturing to lower cost Asian countries.

Pros of Alternative 5:
Asian population already possesses a good taste for shoes and a lot of global brands like Nike are going into Asian countries for establishing manufacturing facilities to obtain economies of scale. It is the heart of the cheap labor in shoe manufacturing region of the world. Procurement of raw materials should be easy. The mix with the culture of the great shoe manufacturing regions the corporate culture of Hush Puppies Chile can become richer. It is a thoroughly untapped market by the name Hush Pappies. So there is ample space for market expansion here for Hush Puppies.

Cons of Alternative 5:
Not procuring the Raw Material from North America and Europe might reduce quality and image. Lower price may lead to brand dilution. There is a chance of rejection of such a premium priced product in the market with such low income. The people might see it as an American assault on their culture and refrain from being loyal to Hush Puppies brand. There are low priced competitors present in the market and the low income people might end up preferring them instead of Hush Puppies.

Recommendation
As business strategists after much discussion we think that alternative 4 should be the right path to take for Hush Puppies Chile.

Alternative 4
Hush Puppies Chile should concentrate on maintaining their leadership in Chile and the Latin American market of casual shoes for high end customers through increasing profitability and efficiency of their plants which should lead to acquiring more market share and profitability for the company in the long run.

Reasons to choose this alternative:

The prestige Hush Puppies Chile has of possessing growing market share in the casual shoe sector in Chile and in some other Latin American countries would be lost if they are loosening their grip in this sector. Other competitors are already there. The market research also indicated that Bata, a large Canadian-owned shoe company with worldwide operations, controlled an estimated 60% market share in Chile. Bata Chile operated primarily as a manufacturing company which sold the bulk of its output to small independent stores throughout the country.They would seize the opportunity to steal the market share. Presently, Hush Puppeis Chile has 30% market share in mens show segment, 8% market share in Womens designer shoe segment and finally 11% market share in childrens show segment. So, there is still room for penetrating the existing market. On the other hand, despite high ambitions, sales remained weak in some recent market development in Uruguay. Manager was convinced that their franchiser company, with little experience in retailing, had chosen less than optimal retail locations. Stores were poorly maintained and the franchiser spent essentially nothing on Hush Puppies advertising and promotion. Sales were also hurt by competition from low priced footwear exported by financially strapped manufacturers in Argentina and Brazil.

Moreover, In Bolivia, a country of seven million, Forus established a licensing agreement with Global Trading Company of La Paz. Although the agreement had been in place for less than a year, two stores had been opened and Hush Puppies Corners had been set up in two department stores. Finally, in 1992, the companys efforts in Argentina were focused exclusively on promoting its Brooks line of athletic shoes. Coast Sport Argentina was established in 1991 and acted exclusively as a wholesaler for a variety of independent retail outlets in the country. Therefore, Hush Puppies Chile should move to

strengthen operations and management skill in recent market developments in existing markets. Secondly Sales employees should be given additional training and new store locations are to be sought out in Uruguay, Bolivia, and Argentina.

Reasons not to choose other alternatives: Alternative 1:

Do nothing Reasons:
Hush Puppies Chile can expect heavy loss in sales if they do nothing about rising competition. Greater loss of market shares to the rivals will take place. Significant decrease in customer loyalty and severe dissatisfaction will also occur. Competitors will take advantage of the resources and utilities and get an ahead in the market. Better market opportunities will go unexploited.

Alternative 2
Hush Puppies Chile needs to explore new business opportunities through diversify internationally outside Chile and Latin America with the current resources. Reasons:
Investment in a new market is always risky. There is a possibility of losses of the investment. Moreover extra investment is needed to set up processing plants for the new ventures. This money will become a bad investment if the market does not prove to prefer the services of Hush Puppies Chile. Besides, exports from Chile were expected to compete with much lower cost footwear from China, India and the Philippines. But, Hush Puppies domestic target market was also the high-end segment which added design and service costs that negated many of Chiles labor cost advantages. Not only that but also Strict regulatory issues from the governments of different nations regarding exportimport sectors have always been a problem for companies like Hush Puppies. The firm may need to conform to new standard. Thus may require to changes such as in the production process, inputs and packaging, incurring additional cost.

Alternative 3:
Hush Puppies Chile should diversify domestically into other retailing concepts and pursue interest in other resources or sectors of consumer product other than shoes such as apparel or branded sport clothing. Reasons
Investment would be needed to establish distribution channels in new markets which can be costly. Costs for retail space in a typical up-scale Santiago shopping mall were estimated at 7% of net sales with leasehold improvements averaging about $U.S. 30,000 which is quite reasonable. It also adds management cost. Secondly, investment will be needed to create brand reputation and contacts in new markets as well. All these would just mean more costs which might lessen initial profits by a great margin. Besides, the company did not have a brand under consideration and was wondering how to aggressively proceed. Lack of proper experience in any sector of the business can proof to be dangerous for profitability. No matter how much market research or environmental scanning is done it would never be equivalent to years of experience in any sector. Hush Puppies has this advantage in the casual shoe business but not in clothing area. Thirdly, it may result in slowing growth in its core business which is casual shoe because of loosing focus. Finally, it would require significant expanding of human and financial resources, which may detracts focus, commitment, and sustained investment in the company core industries.

Alternative 5:
Hush Puppies Chile should go into other Latin American market with full capacity and willingness to saturate the market with mass-market shoes rather than only premium brands. But they should not procure all their raw materials from USA or Europe. The company should seriously consider shifting manufacturing to lower cost Asian countries. We would suggest they start a facility there which can reduce their cost of production by a great margin which could lead into inspiration for lower priced shoes in the arena. Reasons
Firstly, not procuring the Raw Material from North America and Europe might reduce quality and image. Secondly, lower price may lead to brand dilution. There is a chance of rejection of such a premium priced product in the market with such low income. The people might see it as an American assault on their culture and refrain from being loyal to

Hush Puppies brand. Finally, there are low priced competitors present in the market and the low income people might end up preferring them instead of Hush Puppies.