Hush Puppies Chile

Company Background

Buildup of the company

[** Hush Puppies was found by three Swett brothers, Alfonso Swett, Ricardo Swett and Juan Pablo Swett] In 1980, through the concerted effort of three brothers, Alfonso Swett, Ricardo Swett and Juan Pablo Swett, Hush puppies began its operations in Chile. In the early 1960s, NORSEG was formed by the three brothers, a start-up company that supplied safety equipment to industrial and mining sites throughout Chile. With the help of rising sales and a healthy cash-flow, the brothers gradually expanded operations to include real state development, several agricultural projects and a 10% equity position in Elecmetal S.A., one of the largest industrial companies in Chile. Over time to time, these operations were organized as separate companies under the family owned Costanera S.A.C.A. Holding Co. GROUP E HRM 410.02
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Expansion of Wolverine World Wide

[**Hush Puppies emerged as a major brand and Wolverine World Wide and Hush Puppies had established joint ventures and licensing between them and started doing business in Chile]

In the spring of 1979, an advertising agency, Veritas Ltd. Informed the three Swett brothers that Wolverine World Wide was interested in expanding into Chile. Wolverine, based in Rockford Michigan, controlled a portfolio of footwear brands including Hush Puppies casual shoes, Wolverine work and outdoor boots, Bates uniform shoes, and Brooks athletic shoes. Incorporated in 1954, Wolverine traced much of its initial success in footwear markets to its reliance on the production of casual pigskin shoes. In the mid-1950s, Wolverine developed a new elaborate pigskin tannage technology to take advantage of the characteristics of fine grain pigskin and in 1958 introduced Hush Puppies casual pigskin shoes. So the management team of Hush Puppies Chile thought that if they do business with Wolverine, then it will help their business to grow rapidly in the long run and it works in the future.

During the 1960s and 1970s, Hush Puppies emerged as a major brand with particular strength in the mens segment. The infamous brand became a very widely recognized symbol for quality and comfort. Success in the U.S. was followed by international expansion, initially in Canada and Europe. In the early 1980s, spurred by fears that the U.S. government might lift import quotas on low cost shoes from the Far East and Latin America, Wolverine moved to accelerate its international expansion. By 1992, Wolverine World Wide had established joint ventures or licensing agreements in over 40 countries including most of Europe, Japan and South America. Wolverines management is so competent enough in business so that they have cleverly expanded their business in Chile at the initial time when the U.S. government might lift the import quotas on shoes from Latin American countries and the Swett left no stone unturned to patch up with Wolverine which will help the U.S. economy in the long run. GROUP E HRM 410.02

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Current Market Situation in Chile

[** By doing marketing research the Swett brothers came to know that the Chilean people are very much concerned about fashionable, formal and dressy shoes. And by this time Wolverine was looking forward to do business in Chile. So they took the opportunity and came into discussion with Wolverine]

In Chile, Wolverine was looking forward for an agent to import and manufacture Hus Puppies brand shoe under license and in response to that initiative, the Swett brothers commissioned market research studies which revealed that the Chilean shoe market was dominated by formal, dressy products and that no companies effectively met the demand for casual shoes. They did market research on the Chilean shoe market and found out that Bata, a large Canadian-owned shoe company with worldwide operations, controlled an estimated 60% market share in Chile. Like most Chileans, Ricardo, Alfonso and Juan Pablo Swett believed that the open market of 1980 provided an ideal opportunity to start a new business. The brothers were particularly interested in the upper class market in Chile, which by exposure through international travel, was familiar with the Hush Puppies brand, quality and unique designs. Wolverine World Wide also appeared to be an open company; its managers were supportive and personable. The brothers agreed that any venture with Wolverine would succeed. GROUP E HRM 410.02

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A Move To Retailing
[** Hush Puppies in Chile started retailing business but arguments stated that it will be better to open their own Hush Puppies chain store.]

In working with Wolverine, the brothers decided early on that retailing provided the best option for getting Hush Puppies into Chile. Renato Figueroa, Commercial Manager of Hush Puppies Chile in 1980 argued that Retailers treated all brands the same, they do not give special treatment to any particular brand. From their point of view Hush Puppies is quiet same as Bata. So he stated to build their own Hush Puppies chain store. Their decision was based on the notion that if they open up an individual Hush Puppies store chain then they can influence and handle the market, they would know who are their customers, what are their desires and what is in their mind. By doing this might enable them to place Hus Puppies in a different place from the rest of the competition in Chilean market.

Negotiation With Wolverine World Wide

[**Negotiations between Swett brothers and Wolverine World Wide held very well and they came into some legislations such as they will invest $2.0 million initially by taking $1 million loan and $1 million from their own pocket.]

After negotiations with Wolverine, Hush Puppies Chile was given exclusive rights to import Hush Puppies shoes and develop retail outlets in Chile. Although no up-front fees were paid to Wolverine, the brothers committed to opening as many as 25 retail stores within three years. Expectations were that the costs for the first five stores, including leasehold improvements, training, GROUP E HRM 410.02
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inventories and so on, would total about $2.0 million. Of this amount, about $1.0 million would be borrowed. The remaining $1.0 million represented a substantial risk to the brothers. The Swett brothers took the initial risk for better profit and as they know very well that if they took risk now then they might be faced with high grown in near future. They planned to design their stores as family concept outlets in which both parents and children could find comfortable, casual shoes. The best Hush Puppies shoes will be imported from outside Chile and 80% of them from United States. After doing market research of the wealth of the Chilean people, they found out that these highincome level consumers in Chile considered being the upper middle class and upper class U.S. consumers. But the difference was that wealthy American consumers were generally not targeted by Hush Puppies in the United States.

Roles & Responsibilities of Swett Brothers

[**The Swett Brothers divide their roles and responsibilities among them and they desire to continue with professionalism.]

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Stores were situated in large, convenient locations primarily in the Santiago metropolitan area. The sales staffs were extensively trained to better relate to the upscale customers and were well compensated, reflecting the desire for continuity and professionalism. As the management were well aware of the fact that to deliver the customers with high style and well designed shoes, their staffs must have to be skilled enough and they must have to be compensated and motivated well, so the management did focus on the staffs. Shoe prices were set at a 10% premium over average shoe prices and were the same in every store. In distant locations in Chile, the plan was for Hush Puppies Chile to grant franchises to independent retailers.

As agreed upon by the brothers, RICARDO SWETT assumed responsibility as the GENERAL MANAGER of HUSH PUPPIES CHILE. JUAN PABLO SWETT assumed responsibility as the GENERAL MANAGER OF NORSEG CHILE. ALFONSO SWETT was involved in major investment decisions and strategic planning for all family owned businesses as well as some DAY-TODAY DECISION MAKING AT HUSH PUPPIES CHILE. By early 1982, Hush Puppies Chile had established seven shoe stores in the greater Santiago area. The brothers divided their works based on different sectors and they assigned the roles and responsibilities by themselves so that they can concentrate on the growth of the business in Chile.

A Move To Manufacturing

[**Chile was faced with serious downturn in their economy which led the Swett brothers to shift towards manufacturing]

After several years of promising economic growth, the bottom fell out of Latin American economies in 1982. Hit by slumping commodity prices, massive GROUP E HRM 410.02
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national debt, soaring interest rates, and worldwide recession, the Chilean economy, like every other in Latin America, plunged into a state of depression. In Chile, the GNP fell by 14% in 1982 alone. Between the 19821985, unemployment officially hovered around 14%; unofficially, it surpassed 30%. During the same period, the Chilean Peso dropped by 300%, leading to a commensurate rise in import costs.

Due to the economic downturn the company was devastated. Hush Puppies Chile was totally based on imported shoes. Only two options appeared to be possible: either to shut down the company or move into manufacturing. According to Alfonso and Ricardo Swett, they stated that they had firm belief towards the brand; the consumers like it. So as a result they didnt have any choice but to get into manufacturing. As the management was very strong and they also had a very strong belief towards the brand, they knew how they will regain customer value and how to keep the business in the long run.

So based on this phenomenon, the decision was made to move Hush Puppies Chile into shoe manufacturing in April, 1982. In November 1982, Hush Puppies formed a partnership with Wolverine World Wide where 70% of the joint venture owned by Hush Puppies and 30% by Wolverine. In this partnership both the companies agreed to contribute representative amounts of capital to ensure that manufacturing output met growth targets.

In February 1983, a small new manufacturing facility was opened in suburban Santiago which included approximately 10,000 square meters of manufacturing capacity, a two story executive office complex and factory retail outlet. Manufacturing, import and export sales were handled by Hush Puppies Chile, Ltd. Retail operations were organized under the separate company name of Commercial Puppies, Ltd.

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Managerial Heirarchy
[**Hush Puppies and Commercial Puppies were set by the Swett brothers with strong management, centralized organization and with great supervision]

Hush Puppies Chile and Commercial Puppies were both organized with their own board of directors, which included the three Swett brothers, as well as a small group of trusted, Western-educated managers from the operating companies. Most directors served on two or three boards. Strategic decisions were made at the board level and passed down to the operating company general managers. While both Hush Puppies Chile and Commercial Puppies were recognized as separate companies with their own functional structures, managers worked closely together to coordinate activities. Both of the company had a very decentralized structure, the board of directors took all the decisions and their decision is final. Despite these, both the companies had skilled operational managers who always try to work together and try to serve the company as much as they can, this is one of the most positive side of the management team to handle the workforce effectively.

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Introduction of Brooks Athletic Shoes

[**In the year of 1985, Hush Puppies introduced Brooks athletic shoes and 70% of the Brooks shoes distributed in Chile would be sold to outside retailers; the remaining 30% would be sold in Hush Puppies shoe stores.]

By 1985, the Chilean economy started to turn around and from 1985-1990 the company enjoyed rapid growth. In 1985, Hush Puppies added Brooks athletic shoes to fill out its product line. Brooks Athletic Shoes was owned by Wolverine and had benefited in the U.S. by the upsurge in interest in physical fitness. While some of the Brooks shoes were to be manufactured in the Santiago area, most were to be imported from the Far East. It was anticipated that about 70% of the Brooks shoes distributed in Chile would be sold to outside retailers; the remaining 30% would be sold in Hush Puppies shoe stores.

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Expansion of the Business

[**By the end of 1985, Commercial Puppies was managing 22 companyowned stores and Hush Puppies Chile was supervising four franchise stores and by doing these activities they have expanded their business.]

As overall sales picked up, Hush Puppies Chile and Commercial Puppies focused more on building and maintaining key brands. The objective was to develop a reputation for excellence in marketing by emphasizing advertising, service and style. Feedback from retail stores proved a major strength in focusing design and manufacturing on consumer needs. Hush Puppies Chile managers regarded the company as market oriented as opposed to manufacturing oriented, thus differentiating the company from many Far East suppliers. By the end of 1985, Commercial Puppies was managing 22 company-owned stores and Hush Puppies Chile was supervising four franchise stores.

To strengthen marketing efforts, advertising budgets were expanded, reaching 5% of sales in 1987. In 1987, the company started a major advertising program titled the pleasure of walking which was particularly appealing to increasingly health conscious upper and upper-middle class Chileans. Follow-up multicolor ads promoting Hush Puppies line of outdoor casual and hiking boots were placed in major newspapers and top magazines throughout the country. Television advertisements were also developed which focused on Hush Puppies as statements of quality and style. During the late 1980s and early 1990s, Hush Puppies Chile won three annual Wolverine World Wide awards for the quality of its advertising campaign and marketing strategy. The companys strategy to strengthen the Hush Puppies brand succeeded. By the end of 1987, the production of shoes reached 265,000 pairs, an increase of 18% over 1986. In 1988, production increased an additional 15% to 305,000 pairs; in 1989, shoe production was up 29% to 392,000 pairs.

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A Move into Womens and Childrens Shoes

[**After gaining immense revenues and growth Hush Puppies started making womens shoes as well as kids shoes and these segments also gained them much profit in the upcoming years.]

After expanding the business, Hush Puppies Chile and Commercial Puppies gained impressive revenues and growth in their business. But the company remains relatively weak in two important categories: womens shoes and childrens shoes. So to strengthen the companys position in the womens shoe market, more effort was devoted to product design and marketing. The womens product manager, Cardina Schmidt, believed that prior to 1990 the womens product line had not adequately satisfied the style and fashion demands of Chilean women. Good design was particularly important in the womens segment in which styles changed nearly every six months. Women in the target segment were particularly fashion conscious and were generally GROUP E HRM 410.02
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familiar with the newest fashions in Europe and North America. In order to make Hush Puppies more appealing to women, high fashion shoes were imported from Italy, France and Argentina. Hush Puppies Chile also hired exclusive designers to develop its own collection of womens shoes. Designers and managers regularly visited Hush Puppies stores to question women on desired design features like colors and styles. So at that time many promotional tools have been taken and the marketers did several kinds of research by questioning the women in the store, by television advertising campaigns. After doing several research and undertaking promotional campaigns the sales growth of womens segment increased dramatically.

During the same period the company also undertook a major initiative in childrens shoes. Sebastian Swett, a second-generation family member and Product Manager for childrens shoes, imported the history of the companys efforts with childrens shoes. After doing surveys it detects great opportunities for them in the childrens market. The market was very traditional and people are willing to pay extra money for shoes with aggressive colors and concepts such as comfort and security. He also thought that as the company did gain the brand image so it will be easier for them to gain customers who will buy kids shoes. Despite of the disadvantages by not having the environment for selling kids shoes and the well set competitors, in early 1990 Hush Puppies for kids was launched consisting of four different categories which varied accordingly to the age of the child. They have introduced Soft Puppies for infants, Little Puppies for children age one of three years; Young Puppies were designed for children age nine to fourteen years. And again they gain success by undertaking some promotional tools like television advertising and extensive marketing by the management.

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Strengthening the Athletic Position

[**L.A. Gear agreed in the Fall of 1990 to work with Hush Puppies Chile to bring the L.A. Gear brand to Chile.]

By the summer of 1989, Brooks was positioned as the number three brand in the Chilean athletic shoe market after Diadora and Adidas. In the U.S., however, Brooks was a relatively weak brand, a fact not altogether lost on fashion-conscious Chilean adolescents, and L.A. Gear was emerging as the top brand for adolescents. L.A. Gear was a relative new comer in the athletic shoe industry and, to capitalize on its increasing popularity, had begun to search for international distributors. The opportunity to market a more fashionable brand in L.A. Gear was clear and Alfonso approached the company in the summer of 1990. GROUP E HRM 410.02
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Wolverine World Wide was also very concerned about the impact that the L.A. Gear initiative would have on Brooks in Chile. In response, Costanera created Topsport to manage the sale of L.A. Gear. A separate company, Coast Sport was organized to manage all Brooks sales. It was hoped that creating separate companies for athletic shoes would allow greater focus on Hush Puppies brands as well as encourage new sales initiatives for athletic shoes.

Wolverines Manufacturing Position Is Purchased

[**The buyout of Wolverine World Wides 30% share as well as Hush Puppies name has been changed.]

In December of 1991, Costanera acquired the 30% of Hush Puppies Chile operations owned by Wolverine World Wide. The buyout was prompted by Wolverines failure to support Hush Puppies Chiles ambitious expansion plans. During late 1989 and 1990, manufacturing facilities were increased over 30% in Chile in order to keep pace with booming demand. Plans called for production capacity to be increased by another 20% in 1991. New investment requirements in Chile as well as other countries, combined with the need to reinvest profits, translated into a negative cash flow for Wolverine. At the same time, Wolverine was facing changes in the business in the U.S. and was struggling to conserve capital. As a result, a buyout became an attractive option for both parties. The purchase of Wolverines 30% share of manufacturing was estimated to have cost Costanera approximately $3.6 million. With the buyout complete, Hush Puppies Chile changed its name to Forus, S.A. In January 1992, the name of Commercial Puppies was changed to For-Shop, Ltd.

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THEME
The Hush Puppies Chile focuses on the internationalization opportunities facing a successful, integrated footwear manufacturer/retailer based in Santiago, Chile. The highly successful company, which licenses the Hush Puppies brand, has begun a number of international initiatives and must now determine how best to exploit its resources in the future. Ricardo Swett, the family appointed manager of Hush Puppies Chile, must recommend which alternative is most appropriate and how fast to proceed. The management became very worried and at that time they only had two options: either shutting down the company or moving towards manufacturing. But they overcome with it and decided to move into manufacturing by forming partnership with Wolverine World Wide. They overcome with it by launching four different categories of kids shoes for different ages. Ricardo was also faced with the decision of focusing management efforts on either increasing sales in Chile or on expanding sales in other Latin American countries. Some in the company argued that Costanera could do both at the same time. But Swett stated that the company lacks good, competent and skilled managers and they need proper training to keep pace with the changing world.

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Main Issue
Which strategies the management of Hush Puppies should take to control labor costs, expand its business and increase its market share in the time of serious economic downturn and worldwide recession?

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SWOT Analysis
Strength
GOOD RELATION WITH THE RETAILORS THROUGH STRONG SUPPLY CHAIN MANAGEMENT IS THE BIGGEST STRENGTH OF HUSH PUPPIES.

The growth and profit margin ratio of any multinational company depends on the strategies of its management, and how well they maintain their supply chain management. Hush Puppies made the retailing available the greatest alternative for acquiring Hush Puppies into Chile in working with Wolverine. After compromising with Wolverine, Hush Puppies Chile was given restricted rights to import Hush Puppies shoes and expand retail outlets in Chile. Anticipations were that the costs for the first five stores, including leasehold improvements, training, and inventories and so on, would total about $2.0 million. Of this amount, about $1.0 million would be borrowed. The residual $1.0 million symbolized a considerable risk to the brothers. The best Hush Puppies shoes would be imported from approximately the world with about 80% coming on or after the U.S. given the stratification of wealth in Chile, these consumers contrasted constructively with upper-middle and upper class U.S. consumers.

THE DECISION OF MANAGEMENT TO NARROW DOWN ITS FOCUS TO THE CUSTOMERS COMFORT HAS MADE HUSH PUPPIES A QUALITY BRAND.
Hush Puppies emerged as a major brand with particular strength in the mens segment. The infamous basset hound became a widely recognized symbol for quality and comfort. In Chile, stores were designed as family concept outlets in which both parents and children could find comfortable, casual shoes. The best Hush Puppies shoes were being imported from around the world with about 80% coming from the U.S. This product quality was a great strength for Hush Puppies and as a result they were able to attract the customers in Chile. To Hush Puppies, product design was an important issue. They have always GROUP E HRM 410.02
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come up with innovative designs of shoes. 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 recent three years had also been successfully implemented. In order to come close to the ladies customers, the designers talked with them and tried to know their preference, so that Hush Puppies can come up with the desired design shoes of their customers.

THE CHEAP LABOUR COST OF CHILE ADDED THE STRENGTH OF HUSH PUPPIES.

Under the joint venture agreement with Hush Puppies Chile, Wolverine would have right of entry to a new starting place of shoes made with low cost Chilean labor. In February 1983, a small new manufacturing facility was unlocked in suburban Santiago which comprised something like 10,000 square meters of manufacturing capacity, a two story decision-making office complex and factory retail outlet. Hush Puppies Chile and Commercial Puppies were both systematized with their personal board of directors, which included the three Swett brothers, as well as a small group of trusted, Western-educated managers from the working companies. Most directors served on two or three boards.

EFFECTIVE MARKETING STRATEGIES BY THE MARKETING EXECUTIVES HAS MADE THE HUSH PUPPIES POSITION STRONGER.
To strengthen marketing efforts, advertising budgets were expanded, reaching 5% of sales in 1987. In 1987, the company started a major advertising program titled the pleasure of walking which was particularly appealing to increasingly health conscious upper and upper-middle class Chileans. Follow-up multicolor ads promoting Hush Puppies line of outdoor casual and hiking boots were placed in major newspapers and top magazines throughout the country. Television advertisements were also developed which focused on Hush Puppies as statements of quality and style. During the late 1980s and early 1990s, Hush Puppies Chile won three annual Wolverine World Wide awards for the quality of its advertising campaign and marketing strategy.

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LAUNCHING OF NEW ATHLETIC PRODUCTS.

Increasing the product lines is needed according to the demand of the situation for the expansion of the company. Brooks brand products could only be made to other Wolverine licensees. For Wolverine, Costaneras program for growth, sanctioned by the success obtained in Chile, made it the best company to build sales in Latin America. Outside these countries, sales of Hush Puppies or Brooks brand products could only be made to additional Wolverine licensees. For Wolverine, Costaneras program for growth, endorsed by the achievement acquired in Chile, made it the best company to put up sales in Latin America. In the U.S., Brooks was a comparatively weak brand, information not altogether lost on fashion-conscious Chilean adolescents, and L.A. Gear was emerging as the top brand for adolescents. The opportunity to market a more fashionable brand in L.A. Gear was clear and Alfonso approached the company in the summer of 1990. After considerable discussion, L.A. Gear agreed in the fall of 1990 to work with Hush Puppies Chile to bring the L.A. Gear brand to Chile. L.A. Gear shoes would be imported from U.S. inventories or directly from the shoes manufacturers in Korea and China thus sparing Hush Puppies any manufacturing threats.

Weakness:
DIVERSIFIED WORK FORCE INCREASES THE PERUNIT PRODUCTION COSTS OF THE PRODUCT.
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. Also, Hush Puppies Chiles much diversified product line increased per-unit production costs through short production runs while at the same time removing opportunities for high volume exports. A final problem was that direct and indirect labor costs represented only about 25% of total manufacturing costs thus limiting the companys ability to pursue a low cost exporting strategy.

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NOT CONSIDERING THE MANUFACTURING SHIFTS TO LOW COSTS ASIAN COUNTRIES.

The company had never seriously considered shifting manufacturing to lower cost Asian countries. Difficulties in controlling overseas production and the need to respond to rather fickle customer needs undermined the potential savings of overseas manufacturing. 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.

IMPROPER EXPANSION PLAN BY HUSHPUPPIES.

Due to proper control and difficulties of other requirement Costanera acquired the 30% of Hush Puppies Chile operations owned by Wolverine World Wide. The buyout was prompted by Wolverines failure to support Hush Puppies Chiles ambitious expansion plans. During late 1989 and 1990, manufacturing facilities were increased over 30% in Chile in order to keep pace with booming demand. Plans called for production capacity to be increased by another 20% in 1991. New investment requirements in Chile as well as other countries, combined with the need to reinvest profits, translated into a negative cash flow for Wolverine. At the same time, Wolverine was facing changes in the business in the U.S. and was struggling to conserve capital. As a result, a buyout became an attractive option for both parties. The purchase of Wolverines 30% share of manufacturing was estimated to have cost Costanera approximately $3.6 million.

SLOW ABSORVING WITH THE GLOBAL CHANGE

Hush Puppies big problem with growth is people. How can the management of the company keep up with such rapid growth? They need good middle managers. On average, about 60% of their senior managers have had formal university training in management. When they exclude manufacturing managers, this number climbs to about 80%. Still, they spend a lot of effort training our managers. On average, each of their managers receives about 2 GROUP E HRM 410.02
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1/2 weeks of training per year. Sometimes they feel that we are moving too slowly. The world is changing so fast that it is increasingly difficult to stay abreast of what is going on internationally. What worries them is that their managers might not be reacting fast enough. There needs to be a daily commitment to learning.

LOW SKILLED LABOUR DECREASES THE EFFORT OF THE COMPANY.

In Chile Hush Puppies is getting labor in low costs, but they are not well trained and do not have sufficient skills. So their contribution is not as much as fruitful as it is supposed to be. Behind the increasing attention in expanding the retail base of the company was the recognition that retailing was becoming more concentrated. Ricardo was also countenanced with the decision of focusing management efforts on either increasing sales in Chile or on expanding sales in other Latin American countries. Clearly, Ricardo had much to consider. While any major pronouncement would necessitate the maintenance of both Alfonso and Juan Pablo, Ricardo appreciated that they would be relying on him for bearing.

Opportunities:
IF HUSH PUPPIES GIVE MORE FOCUS ON THEIR NEW WOMEN AND KIDS SECTION THEY CAN EXPAND AND GRAB THE MARKET OF THAT SECTOR.
Now a-days Hush Puppies Chile has started to focus the two most important market segments. One is the womens shoe segment and another is kids shoe segment. The companys strategy to strengthen the Hush Puppies brand succeeded. By the end of 1987, the production of shoes reached 265,000 pairs, an increase of 18% over 1986. In 1988, production increased an additional 15% to 305,000 pairs; in 1989, shoe production was up 29% to 392,000 pairs. Despite these impressive gains, the company remained relatively weak in these two important categories. By the end of 1991, Hush puppies had a market share of 30 % for mens shoes, wh ereas it had a market share of only 8% and 11 % respectively for womens and childrens shoes. As a result the competitors captured the market shares. So, if they can focus more in these sections they can get their market share back. GROUP E HRM 410.02
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BROAD MARKET APPLE IS THE BIGGEST OPPORTUNITY FOR HUSH PUPPIES TO EXPAN THEIR BUSINESS.

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. Entire retail sales of Hush Puppies, Brooks and L.A. Gear shoes amounted to 328,000 pairs by the end of 1991. About 74% of these shoes were sold in 25 company-owned stores. An additional 9% of sales were produced through Hush Puppies Corners which had been instituted in shoe departments of 14 major retail department stores. Regarding 10% of the companys sales were also produced through small independent retail outlets. Franchise sales represented approximately 7% of total retail sales. By the summer of 1992, the number of company-owned retail stores in Chile had augmented to 26 with four more diagramed by year-end.

INCREASING EXPORT OPPORTUNITIES IN NORTH AMERICA.

Exports to North America and Europe maintained comparatively self-effacing. Hush Puppies domestic target market was also the high-end section which added design and service costs that negated many of Chiles labor cost advantages. Hush Puppies Chiles manufacturing labor costs in 1991 averaged $2.00/hr. counting all benefits; in neighboring Argentina, wages in the shoe industry averaged from between $2.25 and $2.50 per hour. From a company point of view, a prominence on exporting appeared to build sagacity for two reasons. First, sales to the Northern Hemisphere could potentially offset cyclical sales in the Southern Hemisphere. Any supplementary export sales during the off-season would make available a better utilization of plant and equipment while minimizing fluctuations in employment levels. Second, the added export sales volume would contribute to ever-increasing manufacturing and new product development overheads, in that way increasing overall profits.

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ECONOMIC GROWDTH OF LATIN AMERICA IS OPENING NEW DOOR OF BUSINESS FOR HUSH PUPPIES.

The companys proposal in Latin America began in earnest in May of 1989 when Hush Puppies Chile began exporting Hush Puppies shoes to Uruguay. In 1990, Hush Puppies Chile contributed exclusive franchise rights to the Moliterno family, a diversified industrial company based in the capital city of Montevideo. Moliterno speedily instituted Hush Puppies Uruguay as a whollyowned subsidiary. Forus purchased 55% of Hush Puppies Uruguay in the spring of 1991. According to Ricardo, Hush Puppies Chile had at all times desired to be a partner with Moliterno. The original agreement included an option to buy a majority stake in Hush Puppies Uruguay that Forus decided to exercise. Hush Puppies Chile shifted to strengthen operations. Sales employees received additional training and new store locations were sought out. Essentially no Hush Puppies shoes were exported to Paraguay in 1991 and no changes were sketched for 1992. In Bolivia, a country of seven million, Forus instituted a licensing agreement with Global Trading Company of La Paz. Ricardo estimated that exports for 1992 would amount to about 15,000 pairs or about $U.S. 525,000. Because of triumphing import tariffs, retail prices in Bolivia were set at a 10% premium over Chilean net prices. 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 self-governing retail outlets in the country.

Threats:
OUT OF CONTROLLED DIRECT AND INDIRECT LABOUR COSTS IS CREATING THREAT FOR HUSH PUPPIES.
A major problem of Hush Puppies was that direct and indirect labor costs represented only about 25% of total manufacturing costs thus limiting the companys ability to pursue a low cost exporting strategy. Because of these difficulties, several managers in the company believed that an export strategy GROUP E HRM 410.02
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built on superior design and marketing had the most chance to succeed. Others disagreed, arguing that if Hush Puppies. Chile was serious about substantially increasing exports to North America and Europe it would have to develop lower priced shoes. Such a move would also open additional mass market opportunities for the company in Chile. The company had never seriously considered shifting manufacturing to lower cost Asian countries. Difficulties in controlling overseas production and the need to respond to rather fickle customer needs undermined the potential savings of overseas manufacturing. Managers at Hush Puppies Chile also believed the company had no competitive advantage in importing.

THE RECESSION OF CHILE IS ANOTHER GREAT THREAT FOR HUSH PUPPIES.

Recession is a stage when both investors and buyers have less capital in their hand. As a result production suffers in want of manufacturing costs and produced goods suffer to get their profit margin in lack of customers. Hit by slumping commodity prices, massive national debt, soaring interest rates, and worldwide recession, the Chilean economy, like every other in Latin America, plunged into a state of depression. In Chile, the GNP fell by 14% in 1982 alone. Between 1982-1985, unemployment officially hovered around 14%; unofficially, it surpassed 30%. During the same period, the Chilean Peso dropped by 300%, leading to a commensurate rise in import costs. With Hush Puppies Chile totally reliant on imported shoes, the company was devastated by the economic downturn.

COMPETITORS LIKE CHINA, INDIA AND PHILIPPINES AND THEIR LOW COSTS FOOTWEAR IS A GREAT THREAT FOR HUSH PUPPIES.
Hush Puppies is supplying premium products with greater quality and high price. But is the Asian continent the customers are very much price sensitive. So for grabbing the market share countries like China, India, and Philippines are supplying low costs products and foot wears not only on Asian continent but also in the global market. So hushpuppies have to keep sharp eye on their production costs and pricing.

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Management Perspective
HUSH PUPPIES IS DOING THEIR PRODUCT LINE EXTENTION FOR INCREASING THE MARKET SHARE.
Sticking with the same product is not good for any company. And MCNs like Hush Puppies have their own strategies regarding their product. Hush Puppies emerged as a major brand with particular strength in the mens segment. The infamous basset hound became a widely recognized symbol for quality and comfort. But their competitors are also focusing in many other sections so Hush Puppies have decided to extend their product line. To strengthen the companys position in the womens shoe market, mo re effort was devoted to product design and marketing. The womens product manager, Cardina Schmidt, believed that prior to 1990 the womens product line had not adequately satisfied the style and fashion demands of Chilean women. Good design was particularly important in the womens segment in which styles changed nearly every six months. Women in the target segment were particularly fashion conscious and were generally familiar with the newest fashions in Europe and North America. Not only this, they are now also targeting the Kids section and Athletic footwear sections.

EMPLOYING HIGH SKILLED DESIGNER TO MEET THE DEMAN OF THE CUSTOMERS.

Fashion loving people always want to see change in their styles. But, prior to 1990 the womens product line had not adequately satisfied the style and fashion demands of Chilean women. Good design was particularly important in the womens segment in which styles changed nearly every six months. Women in the target segment were particularly fashion conscious and were generally familiar with the newest fashions in Europe and North America. As a result, Hush Puppies Chiles market share in womens shoe segment was only 8 %. Hush Puppies lost the entire womens shoe market to their competitors. In order to make Hush Puppies more appealing to women, high GROUP E HRM 410.02
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fashion shoes were imported from Italy, France and Argentina. Hush Puppies Chile also hired exclusive designers to develop its own collection of womens shoes. Designers and managers regularly visited Hush Puppies stores to question women on desired design features like colors and styles.

RAPID GROWTH OF THE COMPANY IS INCREASING THE VALUE OF THE SHARE PORTFOLIO OF HUSH PUPPIES.

The value of the market share of any company depends on the current position of the company, and also of its growth rate. One major shove under consideration was to move aggressively into the retailing of apparel. 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. 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. A second option being considered was to open a chain of outdoor clothing stores. A third option for the company was the introduction of a new retailing perception for childrens shoes and apparel. A full line of merchandise would accompany a full shift into childrens retailing by filling out stores and providing an added draw for consumers. Behind the increasing attention in expanding the retail base of the company was the recognition that retailing was becoming more concentrated. Ricardo was also countenanced with the decision of focusing management efforts on either increasing sales in Chile or on expanding sales in other Latin American countries. And this huge growth is increasing the valuation of company day by day.

Workers are very happy and proud to be the part of the company

Hush Puppies is maintaining a very good reputation in the marketplace by keeping their product quality standard, fulfilling the need of their customers. Workers in the company are proud to be the part of it. This kind of motivation GROUP E HRM 410.02
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that workers feel for the company. They feel that they are working in that environment which maintains a strong ethical value regarding their product line.

Hush Puppies is maintaining strong supply chain management.

The growth and profit margin ratio of any multinational company depends on the strategies of its management, and how well they maintain their supply chain management. Hush Puppies made the retailing available the greatest alternative for acquiring Hush Puppies into Chile in working with Wolverine. After compromising with Wolverine, Hush Puppies Chile was given restricted rights to import Hush Puppies shoes and expand retail outlets in Chile. Anticipations were that the costs for the first five stores, including leasehold improvements, training, and inventories and so on, would total about $2.0 million. Of this amount, about $1.0 million would be borrowed. The residual $1.0 million symbolized a considerable risk to the brothers. The best Hush Puppies shoes would be imported from approximately the world with about 80% coming on or after the U.S. given the stratification of wealth in Chile, these consumers contrasted constructively with upper-middle and upper class U.S. consumers.

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