International Buisness

Using one specific multinational enterprise with which you are familiar, examine the ways in which the 'credit crunch' has impacted its operations. Evaluate the strategic responses it has made, and might make going forward, to respond to the impacts of the credit crunch on its operations.

The credit crunch has affected a countless number of companies and countries over the past few years. The credit crunch that hit many countries in 2007 was trigged by a shortfall of liquidity within the banking systems which caused many government bodies to help bail out the banks. This is due to the banks over lending over people's actual income, which people had no means of paying back with some cases banks leading to illegal immigrants. Banks in the UK stopped lending between each other and thus relying on foreign capital investments, this even lowered our credit rating down from AAA. This has triggered a failure in a number of businesses also consumers have been closely watching over their money and curving their spending trends as consumers because they have had a lower income, also the interest rate dropped to 1% mark being at an all time low. The 100% mortgages being dropped making it harder for first time buyers to buy or people that are trying to move up the housing ladder. The impacts of the recession has hit almost every government, business and even the public, with the UK having a rise in inflation, the unemployment raising due to a number of business going into liquidation and even the housing market going for a double dip rescission.

The company I'm will be looking at is C and J Clark International which is more popularly known as Clarks. The company being the market leaders in the UK above Nike shoes. The company specialising in shoes that are built for comfort and fitted to help children's feet to grow healthily also having a number of technologies behind there different ranges which tailor to everyone's needs. The company has been going for about hundred and eighty years going through a number of recessions one being in 1863, staying one foot ahead with new technologies starting with the singer sewing machine which increased manufacturing to a new time high, going through a number for eras which has changed the modern world such as the invention of the telephone even the zip. The company has even gone through both World Wars playing a huge part in the war but still standing strong in the modern markets of today.

The market has been growing at a rapid rate due to low barriers in the market a number of companies have tried to penetrate through creating a raise in competition over recent years, also clothes looking to expand out looking for a bigger market share breaking into the footwear market, so how has the company tried to stay ahead of the market and prevent the raise in competitors affecting them.

Porter's 5 Forces

Looking at the footwear marketing as a whole using Porters Five Forces which analysis the market for which we are in which shows the strength and the weakness of the competitors in the market.

Threat of potential entrants

The market has been growing over recent years being attacked from all bases; this is due to a low market barrier which has made it easy for companies to start up shops which has been increasing competition at an exponential rate. These entrants to the market have been outshining the specialist retailers in both price and styling's with a third of the market looking for stylish shoes over comfort and fittings with companies such as New Look who have stayed on trend especially in young wear with teenagers shopping for the new high street fashions. Price has been the pivotal point on the market with most of the new entrants having lower manufacturing cost and the value priced by the retailers both cost and selling have been focused down. With the failure in innovative in the 1990s left the market open to be attacked by fashion retailers who were looking to further themselves, so many diversified into the footwear making the shoe marketing more demanding with a higher competitiveness between firms.

Threat of substitute product

The market is flooded with a high number of retailers selling footwear with a variety of price tags, with shops such as Primark to Topshop all selling footwear trying growing in the market. Theses shops have been taking custom away from traditional shoe retailers such as Clarks making it harder for stores to stay ahead of the market. Due to low prices on the high street expenditure on footwear has increased to 17.7% between the years of 2004 to 2008 with consumers reaping the benefits of the new market. And with the high number of substitute products on the market all at a lower prices then their counter products from the turn of the century in both relative to earnings but in absolute terms, this has effected and drop consumer spending.

Bargaining power of the buyer

The customers have a huge power on the market they have the power to make or break products and this is where many shops have failed over the last few years. Maslow (1954) a theorist who looked at human behaviour and he stated that all human needs can be arranged into a hierarchy.

Figure 1 show Maslow hierarchy of needs

The basic needs of people are at the bottom such as food and water then moving onto more complex needs on the top such as relationships . Like heating and food which we need to survive clothing and footwear are also a basic need. With the credit crunch many household budgets have been tightened and the market has suffered from it diminishing the importance of clothing and footwear which has lead to a drop to 6% of total consumers spending affecting the market making stores compete more over price.

Rivalry between existing firms

There is a clear divide in the market between cheap and luxury products which have been the main rivalry between firms, with Clarks being the market leaders in specialised shoes. Over the last few years we have seen a change in people habits to shopping. Many people buying cheap shoes as it suits their budgets but these shops have been tainted with shoes being made by third world countries and exploiting workers to poor wages such as Nike. Also products failing people needs such as breaking in a few weeks like children's shoes which they need for school but break after a few