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Global Organization Of A Company

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Mercury Footwear Inc.

Team 7

Ryan Krause

A. J. Lahotay

Usman Qureshi

Jeanette Fauth

Mercury Footwear Inc. is an established athletic footwear company that serves customers through domestic retailers and foreign and domestic customers online through their website. Mercury Footwear Inc. first began operations in 1997 and has experienced substantial growth over the past nine years. Financial status for Mercury Footwear Inc. has been proven a success with impressive revenue numbers comparing with other brand names such as Nike and Reebok, climbing prices per share of common stock, and net earnings recently reaching an all time high.

Currently Mercury Footwear Inc.’s base for manufacturing their athletic footwear is a company owned manufacturing plant located in Vietnam. This country has proven a profitable investment because of the tax breaks, inexpensive land, and cheap labor costs. Over the past nine years, shoes produced in Vietnam have been shipped to the company’s only distribution center for disbursement to customers, located in Memphis, Tennessee.

The distribution center in Memphis, Tennessee provides jobs to over 6,000 employees and has been an important part of Tennessee’s job market. In any given year an average of 2.1 million pairs of shoes are filtered through the distribution center to fill orders all across the country. The main distribution of our products are to independent footwear retailers carrying athletic footwear such as department stores, retail shoe stores, discount chains, sporting good stores, and athletic pro shops. Examples of our current retailers include; Dick’s Sporting Goods, Dunham’s Sports, The Sports Authority, Inc., DSW Shoes, and Foot Locker Inc. Along with the distributions made to retailers in the US, Mercury also is a big distributor to consumers ordering online from the company website,

A very popular name in sports shoes, Mercury produces several different styles of athletic shoes to appeal to a larger audience. These types of shoes include athletic footwear for running, walking, cross training, basketball, track, as well as cleats for soccer, football, and baseball. The design staff, located near the headquarters in Memphis, creates the different models, features, and stylish new designs to keep the product line fresh and keep up to date with the latest fashion trends. Outdated styles are often sold to discount stores and outlet retailers or through a clearance link on the company website. Even outdated styles haven’t shown to lose much value in recent years as demand continues to increase.

The continued success of Mercury Footwear Inc. both to retailers and online, along with increasing demands for the shoe outside the United States have given top management the confidence to take Mercury Footwear Inc. international and invest in a new distribution center in Europe. Saturated markets in the domestic realm have provided the ability to financially expand the business. Outside an already saturated domestic market, Mercury Footwear Inc. has recently given more attention to the increasing number of foreign sales from the online website. Though the owners were not anticipating the large amounts of orders from foreign markets via the website when Mercury Footwear Inc. was established in 1997, the demand has been a pleasant surprise.

The website, created in 1998, at first was only in English, but over time it was moderated so that it could be linked into different languages. In the beginning, the marketing team was more concerned with maintenance and responding to questions and concerns than specifically using the website to market to foreign consumers. Over time, however, these foreign markets have generated a greater number of sales each year and are forecasted to reach a level comparable to 48% of total sales. Research done abroad has provided information and numbers that reveal to management that our internet sales and shipping expenses incurred upon the consumer raise the total price of our products. This positive outlook has lead to the decision to open a second distribution center to better serve our foreign customers and target the European market more specifically. As mentioned, calculations and research have proven that because of the shipping costs current customers are willing to pay through online ordering, Mercury Footwear Inc. could sell the product at a higher initial price, but reduce the delivery time to zero. For example, if an unsolicited market is purchasing shoes for an initial cost of $20.00 and the shipping cost is $15.00 for a total cost of $35.00; we are losing out on large potential market sales.

With this in mind, Mercury Footwear Inc. is opening a distribution center where our highest volumes of sales are coming from. From there we plan to sell our shoes to those customers that are willing to pay, but with no waiting time for the product. This would prove to be more profitable because of the doubling of export tax and shipping costs from using one distribution center. This will also allow the company to increase the market share globally. Without losing focus on the initial success of domestic operations and by maintaining the domestic market, Mercury Footwear Inc.’s desire for continued growth is ready to specifically target these unsolicited markets.

Because of the high volumes of sales from Europe, specifically Germany, this is where we will be opening our new distribution center, selling our shoes to German retailers and using the distribution center to serve all of Europe, increasing sales and profits and capitalizing on an unsolicited market. The risk of entering a foreign market is significantly reduced in Germany because Mercury Footwear Inc. is following the customer base already established. The demand from the website is substantial enough to support opening a distribution center in Europe. Sixty-five percent of Mercury Footwear Inc.’s online sales are already being shipped to Germany and there are also two hundred and twenty-six current shoe retailers throughout the country. Germany’s Federal Statistical Office reports that retailers specializing in shoe sales recorded total sales worth 7.3 billion dollars in 2003, a number that was still on the rise. Germany is considered one of the top thirty six high-income countries with a population of 82,150,000 and ranks as one of the seven traditional countries with the largest economies as measured by gross national



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