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GEOX breathes
Entrepreneurship and Innovation Strategy Project

Vanessa Meheut
Israel Roman
Alfredo Maldonado

GEOX breathes: An innovation-based business strategy

INTRODUCTION

In the macroeconomic level, innovation is widely seen as a strategic driver of national

competitiveness in the long run since it is the only good that does not suffer from diminishing
rates of return. According to the World Economic Forum, innovation is particularly important
for economies as they approach the frontiers of knowledge and the possibility of integrating and
adapting exogenous technologies tends to disappear. Therefore, innovation policies have been
undertaken by governments to assure economic growth in the globalized landscape.
In the business world, innovation comes to be a crucial driver in the companies strategy in
order to create a sustainable competitive advantage in the sense of that it stimulates an ongoing
improvement of the quality of a companys services and products portfolio and a search of
organizational and productive flexibility to react to market changes faster than its competitors.
Even though the applicability of innovation is widely known in industries such as internet,
healthcare, computer, and telecommunication, it is becoming popular in economic sectors that
one could never imagine: the footwear market is a good example of this current tendency.
The Italian footwear brand Geox has shown how building up a unique strategy around
innovation can lead a company to position itself as the second leader of its market in less than a
decade. The present project has the purpose of showing how Mario Moretti turned an idea into
a successful business; we will first explore through the grassroots of the Geox breathes
patented system and will then give an insight of the strategy implemented to commercialize
such an innovation.

GEOX breathes: An innovation-based business strategy

GEOX: THE NEW LEADER IN THE ITALIAN FOOTWEAR MARKET
Geox was born in Italy, home to creativity and ideas. Each Geox
product is the result of patented researches which are carried out in our
laboratories. Each new collection is created by the best Italian designers.
Geox breathes and walks all around the world thanks to its double soul
made of Italian fashion and technology.
Mario Moretti Polegato
Geox Chairman

Geox stands out in the extremely competitive footwear and apparel market for its ability to
make its products breathe1. The Geox Group creates, produces, and distributes footwear
and apparel; its extraordinary success is due to the technological characteristics of its product
portfolio that improves foot and body comfort in a way that consumers are able to appreciate
immediately. Geox value proposition is complemented with the fact that the company has
followed a footwear style that is in line with the latest fashion trends in the world. The
company looks to the future being guided by its mission and keeping its corporate values
(Exhibit 1) while always respectful of the quality of interpersonal relationships and business
ethics.
According to Shoes Intelligence 2008, Geox is market leader in Italy in its own segment and is
the second brand world-wide in the International Lifestyle Casual Footwear Market- after the
British brand Clarks. Its financial results for the fiscal year 2008 also show its outstanding
performance in the market having net sales for above $ 892. Furthermore, despite of the
international economics downturn and a slowdown in consumption, it achieved a growth of
16% in comparison to 2007 (Exhibit 2). Mario Moretti, the Founder and Chairman of Geox,
wants to go further with the company. He is now considerably investing to improve its leather
soles patent, intends to strengths its presence in critical markets- Europe, Canada and USA- by
opening new Geox stores-it has now 940 mono-brand Geox stores including 640 outside Italy-,
and hopes to reinforce its competition against the big players of the athletic shoes. Is Geox
ready to become the absolute international leader in its market?

GEOX breathes: An innovation-based business strategy

I. THE INNOVATION
THE HISTORY BEHIND THE GEOX INNOVATION
From wine producer to tech-innovator
The Geox name was born from the fusion of the greek word GEO (earth in greek) where
everybody walks, and from the letter X that is a symbol of the technology. The origin of the
name is an evidence of the companys DNA that has based its success in a revolutionary idea
that has made of the comfort, well-being and health its main drivers.
In 1989 Mario Moretti Polegato that worked in the agricultural and wine sector creates the
concept of the shoe that breathes. Like normally happens, the innovative ideas are born
fortuitously. The Geox business idea did not need of brain storming sessions or complex
strategic analysis marketing, but just from an allergy of the entrepreneur to the sweaty feet.
Moreti Polegato was in Reno, Nevada, in a wine exhibition when he decided to jog in the
desert, the weather was hot and the shoes did not make easy the transpiration, so he decided
to cut a hole in the soles of his running shoes. His feet immediately felt cooler and the idea of
the breathing sole was born.
Developing the first prototypes of rubber soles
The introduction of the rubber sole happened more than 50 years ago and had represented an
important technological improvement that changed the life of millions of people around the
world. Thanks to the rubber sole the shoes became waterproof, but still the rubber sole did
not allow the feet to transpire even considering that feet produce 100 liters of sweat each year.
Back in Italy he started to research in a small laboratory of a shoe company, property of his
family, and develops the first prototypes of a shoe with a holed rubber sole, that allowed the
feet to transpire while keeping waterproof. It manages to adapt a membrane that was originally
used by the NASA in the astronauts outfit: a Teflon-like membrane whose latest version has a
billion micro pores per square centimeter. The micro pores are much smaller than a droplet of
water but larger than a molecule of sweat vapor.

GEOX breathes: An innovation-based business strategy

Towards children, women and men shoes production
The membrane was patented. At first he just wanted to license the technology to shoe makers
and get back to make wine, but for three years no company was interested in the concept of
the shoe that breaths. Moretti Polegato believing in the potential of his invention decides to
produce shoes by himself. Not having knowledge of the potential market, and not having a
sample to test its prototypes, he decides to give away for free the shoes to the children
orphanages that immediately used the shoes allowing to the Geox technicians to obtain a quick
feedback and develop the first line of shoes for children within a year.
Two years later, in 1995, Geox begins to develop shoes for men and women. The Geox shoes
manage to overcome the trade-off between comfort and hygiene and begin to being well
accepted in the market. The production process was nearly full outsourced and Geox
concentrated on the main enterprise functions like Marketing, Distribution, Sales and especially
R&D. The brand was heavily advertised and given that the production was outsourced, it
allowed to the company to diminish costs, keep flexible and invest in activities that generate
value.
Discovering the leather soles and going abroad
In 1999 the company laboratory, that is constantly studying the human body transpiration and
heat dynamics, develops a solution that allows the hot air and humidity produced by the body
to be conducted through a special fabric around the body, and be dispersed into the air. This
discovery allows the company to move from the shoe business to that one of the total look,
because the invention is applied to jackets, coats, etc. In 2000, Geox started its international
expansion targeting Europe to launch its product line and to observe the dynamics of demand
for shoes.
In 2001 the Geox laboratory develops a waterproof leather sole, based in its famous
waterproof and breathing membrane, that eliminates the sensation of humidity when the
leather soles become wet by the rain or the terrain.

GEOX breathes: An innovation-based business strategy

Investing in marketing and training a sales force
Also in this year Geox begins to launch its mono-brand points of sale through direct ownership
or franchising. These stores are decorated (Exhibit 4) in a way that the technological Geox
innovations are clearly perceived by the customers and the employees are trained to explain to
the clients the benefits of Geox technology, so as to collect the comments and suggestions
made. For this purpose it is created also in this year the Geox School in order to infuse in the
new employees the GEOX DNA, meaning philosophy and specialized training for its particular
function.
Going public to the Milano Stock Exchange
In 2004 Geox launches its successful IPO in the Milano stock exchange and starts confronting
to the Chinese producers without a flinch, but by opening new stores and new models of shoes
and clothes for men, women and children targeted to the middle income consumers, that
transform the brand into a family friendly brand. But the Geox innovation doesnt stop here, in
2007 launches in Dubai its line of transpiring military boots that are currently used by the Saudi
army.
New challenges
The next trick of Geox are its new trainer shoes, with his patented no-sweat technology that
went on sale on the Christmas of 2008, facing Geox in a battle against well established shoe
behemoths Adidas and Nike.

THE FOOTWEAR INDUSTRY IN EUROPE

The footwear industry is a sector that is now in a mature stage in Europe. The players that are
operating in this market have very fragmented market shares, that obligate them to focus in
cost based strategies or differentiation strategies to mange to grab decreasing margins. With
the changes that globalization has caused this situation has become worse.

GEOX breathes: An innovation-based business strategy

The bigger companies, which have stronger managerial and entrepreneurial skills, have managed
to take the opportunities of development, among them the production outsourcing into low
labor cost countries. In contrast the small companies suffer and are constrained in many cases
to abandon the sector. According to exhibit 5, it is clearly noticed the production decline, the
export stabilization and the increase in the imports.
The sector has seen the exponential growth of the Chinese competitors, especially in the low
cost segment. With the elimination of the duty and quota barriers in 2005, the number of shoes
coming from China into the European Union has increased to 1.25 million of pairs (Exhibit 5)
and represents the 64.5 % of the total European imports; other countries with increasing
imports to European Union are India and Brazil.
THE FOOTWEAR INDUSTRY IN ITALY
Italy has a long shoe making tradition: the value of the Made in Italy brand in this sector is
recognized thorough the world and the premium prices of the Italian shoes are proof. In the
main regions of shoe making traditions (Marche, Toscana, Veneto, Lombardia, Campania, Puglia
and Emilia Romana) are concentrated the 96.7 % of the national companies and 96.3% of the
workforce.
In recent years this companies have been forced to move its production and raw materials
purchasing to remain competitive at world level. This has translated in a stable sales level of 7
billion euros, with less shoes produced, indicating that the medium price of the shoes has
increased. This indicates the repositioning of the Italian footwear industry into the high end
markets. The products in the economy zone are abandoned to the Chinese competitors in
favor of a higher quality production.
The biggest Italian companies have bet to the value of the Italian style, bigger investment in
publicity and the development of aggressive distribution politics. At the same time, they are
outsourcing the low added value production phases and targeting the new emerging economies
like India.
Is finding a new strategy some kind of mission impossible for companies operating in such
mature markets as footwear?

GEOX breathes: An innovation-based business strategy

One of the answers that Geox has for the above questions lie in its R&D policy: since the first
patent, dating back to the early 1990s, Geox has continued innovating, investing heavily in
research and development. The Geoxs Research and Development laboratory is a state of the
art facility. In temperature controlled environments, shoes are tested for different ambient
conditions. Sweat simulators measure humidity by injecting water into heated shoes, mimicking
glands in the feet. Walkmeters apply tens of kilos of pressure to shoes that are then taken on a
200-km endurance walk. Fleximeters put Geox patented soles through rigorous test of tens of
thousands of flexions. Experiments and tests are performed on materials, processes and
products in disciplines ranging from chemistry to physics, to orthopedics, to foot ergonomics.
Many research activities result from formal cooperation with Italian and European university
departments and international research centers (a broader explanation of this issue will be
provided on section II, Value chain: leader by necessity)
This conspicuous research effort has resulted in a stream of patented inventions and
innovations related to the original concept, as well as many relating to materials (e.g. plasma
applications), products (e.g.: the breathable leather shoe), processes (e.g. glue saving assembly
and sewing systems allowing improved shoe perspiration and flexibility), equipment and
machinery (e.g. for shoe sole molding and injection). This series of corollary patents developed
around the original patent have also the function to make it impossible, for competitors, to
simply copy the product when the original patent expires. In fact, Geox currently has some
thirty patents and the original one, which expires in 2009, will be practically unusable by
competitors because of subsequent improvements.
THE LEADERSHIP THAT DROVE GEOXS SUCCESS
In a recent interview to The Sunday Times2, Moretti states that There are three kinds of
entrepreneurs, those that don't see, those that can't see and those that foresee. The best are those that
foresee. You must be innovative beyond the imagination of consumers. This business thinking is
more likely to be found in the US but among in Italian company where the majority of business
are family owned.

GEOX breathes: An innovation-based business strategy

Moretti is a third-generation wine maker and his vineyard, Villa Sandi, is one of Italy's most
prolific wine producers. He and his younger brother, Giancarlo, had every intention of carrying
on the family's wine business after the death of their father in a Ferrari accident. But his life's
course took a strange diversion in the early 1990s, when he came with the idea of shoes that
breathe. Now, Moretti has left the wine business to his brother and his team so he can devote
his energies to eliminating sweaty feet.
Following his intuition, Moretti started Geox slowly, producing only children's shoes in Italy,
before expanding the range. He then embraced franchising to roll out his retail arm quickly only a fifth of his mono brand shops are wholly owned. In another interview with The Globe
and Mail newspaper3, Moretti says that he has no intention of selling Geox - he owns 71% of the
company - and hopes to pass it on to the next generation.
Even though, analysts are concerned that Morettis enthusiasm for breathable technology might
lead him astray, he wants to rid the world of hot sweaty feet by keeping what he calls his
formula of critical factors4 (exhibit 6) that has distinguished Geox from the rest of the footwear
sector, both in Italy and abroad.

GEOX breathes: An innovation-based business strategy

II.THE COMMERCIALIZATION OF THE INNOVATION
TOWARDS A SUSTAINABLE COMPETITIVE ADVANTAGE
A theoretical framework
When we see a company outperform competitors in a given industry, its because it has created
a difference that it can maintain. The essence of strategy is exactly this: choosing a different
position within an industry, that involves a unique configuration of activities. The uniqueness of
such a configuration rests not only on which activities a company performs and how it
configures each of them, but also on how such activities relate to one another.
According to Camuffo, Furlan, Romana and Vinelli5, companies usually concentrate on
incremental innovation, on performance improvement via best practice benchmarking, on
introducing piecemeal change to optimize single activities, and on imitating rivals. But, as the
space gets increasingly crowded, prospects for profits and growth are reduced, especially for
newcomers. These behaviors are often evident in mature industries like textiles, apparel,
footwear, and eyewear, where the potential applications of new technologies are less valuable,
or, at least, less immediately straightforward.
Market definition: a Blue Ocean Strategy
In the Italian footwear industry, for decades, Italian companies -Ferragamo, Magli, Pollini,
Rossetti, Rossi, Tods- have successfully competed by carving out a strategic position
characterized by a market niche focus, fashion based reputation, continuous style innovation,
craft-like quality, and domestic production. But now, challenged by globalization as never
before, many of these companies have lost their edge or even experienced sharp declines in
profitability. Mitigation strategies have failed, including investment in brand and retail, defensive
strategies based either on clinging desperately to the Made in Italy label, or on moving
production abroad to reduce cost. These initiatives have rarely proven successful in the long
run, usually because they have not created a value difference for customers, and rather
produced more of the same things.

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GEOX breathes: An innovation-based business strategy

What Mario Moretti Polegato achieved with GEOX is a partial redefinition of the footwear
market. GEOX changes the basis of competition: it is not only style that matters; it is also
comfort and healthiness. Instead of addressing only design and style issues, the new Italian
shoemaker decided to focus on technological innovation to get rid of sweaty feet. In Polegatos
own words, GEOX is unique because We are technology with Italian style.
In that respect, we can analyze GEOXs market definition by using the Blue Ocean framework
developed by Professors W. Chan Kim and Rene Mauborgne. Some factors of the industry
were eliminated, others were created; some were raised in comparison to the industrys
standards and others were reduced.
Exhibit 7 gives a framework that describes which choices were made by GEOX to define a new
market segment in the footwear industry. The key element in GEOXs market definition is the
elimination of traditional market segments. Convinced by the idea that no one wants sweaty
feet, Polegato decided to build a company that can serve all the market segments -children,
men, women and he is now trying to conquer the market of sports footwear-. The breathing
shoe-sole is a platform technology on which any kind of design can be sewed. Camuffo,
Furlan, Romano, Andrea Vinelli6 also illustrates GEOXs blue ocean strategy by showing the
performance landscape where GEOX is in comparison to where its competitors are (Exhibit 8).
Eliminating traditional market segmentation makes it possible for GEOX to reach high
production volumes and therefore economies of scale as far as production is concerned especially production of the rubber soles membrane, which is the same in every pair of shoe
produced by GEOX). Returns on investment in production facilities and R&D spending are
higher because of the size of the customer base and the subsequent number of product lines
developed by GEOX. Economies of scale are also possible as far as marketing and
communication costs are concerned: GEOX chose to communicate solely on the basis of its
technological innovation so instead of having different communication campaigns depending on
the market segment, all products are advertised with one advertising campaign emphasizing the
importance of dry feet.

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GEOX breathes: An innovation-based business strategy

Finally, the absence of segmentation also enables GEOX to have a flat price -and affordable
though not cheap: GEOX products are priced within the $120-$325 price range- for its shoes
in comparison of the rest of the industry: most shoemakers price their shoes depending on the
price range contingent on the target customer base, GEOX can price all its products on the
basis of the innovation they provide.
Because of those economies of scale and because of the trade off made between R&D and
style, GEOX can afford to spend a lot of money on R&D on the one hand and communication
and advertising on the other hand. R&D accounts for 3% of net sales, which is largely above the
industrys standards and 10% of net sales are invested in communication and advertising to
increase brand awareness and recognition.
As far as its design strategy is concerned, GEOX adopted a fast follower attitude: GEOX
products do not set trends. On the contrary, designers at GEOX identify the fashionable trends
-thanks to Datamarket, a CRM tool that gives immediate feedback on customers tastes
regarding colors, styles, price- and decide on GEOX acquisition strategy depending on this
information. Since there is no real first mover advantage in the mature footwear market -at
least as far as product designs are concerned because products are easily reproducible- and
since GEOXs competitive advantage lies in its technological innovation, GEOX lets other
players bear the risk of producing large volumes of products whose designs might not prove
successful. Therefore, the company capitalizes on the externalities deriving from the companys
location among fashion trend setting industrial districts to produce small batch of potential
products that are pilot tested before production on the large scale is launched. Once successful
designs have been identified, GEOXs flexible system enables the company to quickly put on the
market its new products on the shelves. In that respect, GEOXs strategy is quite similar to
Zaras one.
As far as production is concerned, GEOX developed a dual manufacturing system made of giant
manufacturing plants as well as a large number of small suppliers specializing in one or more
styles of the collection or in one task of the many manufacturing tasks (upper construction, sole
bonding).
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GEOX breathes: An innovation-based business strategy

Four large plants are in charge of producing volumes of undifferentiated parts -the rubber soleand are located in countries where the workforce is cheaper compared to Italian standards.
Having production concentrated in a few locations is key to reach production efficiency
(economies of scale) and confidentiality. Smaller suppliers work on the upper parts of the shoe
and on assembling the different parts.
Some of the manufacturing plants are outsourced and others are owned by GEOX. Reasons for
those choices will be detailed in the following paragraph. 80% of GEOXs production is now
outsourced. Since production is not where GEOX gets its competitive advantage, it makes a lot
of sense for them to have contracts with suppliers and to devote their main resources on what
matters to them: technological development and marketing opportunities.
Value chain: leadership by necessity
GEOXs value chain is similar to that of any manufacturing company (Exhibit 9). The difference
between a company like GEOX and any given shoe company is the fact the GEOX chose to
focus on elements that were not seen as crucial to be successful in the industry. The problem
with this blue ocean strategy was that few people recognized the genius of Polegato for coming
up with this new idea. It is only because he could not find any buyer that Polegato decided to
launch the company on his own in order to make the innovation comes true. His personal
wealth, inherited from his family which had been in the wine business for three generations and
had been making good money out of it, were essential in building the company. He had no
choice but to resort to his personal resources to develop the prototype and start
commercialization at first.
Though GEOXs key strengths are technological leadership -R&D- and marketing and
communication skills, the company had to invest a lot to create an ecosystem that enabled
production and distribution of its products.
The construction of the ecosystem was facilitated by the companys presence in Montebelluna,
an Italian region with a history of shoe manufacturing. Polegatos personal wealth and
connections enabled him to get in touch with research facilities in the area -Universita di

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GEOX breathes: An innovation-based business strategy

Padova and the ENEA-Italian National Agency for New Technologies, Energy and the
Environment- working on the topic of human body heat. Help from those research facilities
enabled Polegato to develop the first prototype of the breathing shoe, using a technology
developed by the NASA to let perspiration be evacuated whilst maintaining waterproof
qualities.
The first large production plant for rubber soles was fully owned in Romania to take advantage
of the cheaper workforce in Eastern Europe countries. Built in 1997 in Timisoara, the plant was
produces a third of the companys total volumes. The overall investment exceeded 10 million
euros and the plant covers an area of about 25,000 square meters. Many Italian suppliers
specialized in assembly or cutting have reallocated part of their facilities next to GEOXs plant
in Timisoara to ensure rapid restocking. As a result of GEOXs presence, a mini footwear
industrial district has been created in Romania.
Since owning production facilities is not vital to GEOXs business model, the company now
builds on its brand name to partner with other shoemaking companies to have access to
production facilities abroad. Thus, GEOX committed itself to the Aokang Group, a Chinese
company and a major player worldwide (second largest company in international design,
production and sales of brown shoes). The company owns over 30 subsidiaries and a retail
network of 2,000 franchise stores and sale outlets across China. The alliance between GEOX
and the Aokang Group gives to GEOX access to Aokangs network as far as manufacturing and
distribution are concerned. In exchange for that, GEOX reallocated its R&D center in Asia
from Japan to China. The alliance is covered by a strict license enforcement system to prevent
GEOXs technology to be imitated by Chinese manufacturers.
Finally, to build its production ecosystem, GEOX tied with a number of Italian and European
research centers and universities in order to ensure its technological expertise concerning
human body heat and therefore to maintain its heyday. Value capture is ensured by the number
of patents that GEOX places on its innovation. A total of 35 patents protect not only the
membrane used in the sole but also materials, processes (glue saving assembly processes and
sewing systems allowing improved shoe perspiration and flexibility), equipment and machinery for shoe sole molding and injection- used to produce GEOXs shoes.

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GEOX breathes: An innovation-based business strategy

GEOXs strategy as far as distribution is concerned bears some similarities with its strategy for
production. It will be detailed in the next section addressing timing and choice of entry issues.
Timing and choice of entry: incremental moves to reach the market
GEOXs distribution system is dual: on the one hand, a number of independent multi brand
shops distribution GEOXs shoes along with shoes from other manufacturers -approximately
10,000 shops-; on the other hand, there is a number of single brand GEOX stores -940 stores
as of March 2009-. Among those 940 stores, 80% are franchised and 20% are owned by the
company and run like flagship stores located at the heart of the major cities -New York, Paris,
Roma, Beijing, and so forth-. Flagships stores usually display showrooms where product lines
are presented (Exhibit 4). This mix enabled GEOX to have a rapid access to a large scale
worldwide as well as to keep a close relationship with its customers in order to monitor their
preferences. This choice of entry was decided early on. As the company grew and its revenues
increased, more and more flagship stores were opened to contribute to CRM data collection
and to brand awareness.
GEOXs strategy is characterized by the notion of progressive reach. The fact that there is no
real first mover advantage -the innovation is patented- backs this careful strategy. The company
targets a very large customer base -more or less everybody- but its strategy is that of a prudent
company which does not want to fall into the reach trap. As a result, GEOX progressively built
brand awareness in its domestic market before considering moving abroad. And the very first
step to built brand awareness was to address the market of children shoes before moving into
other segments of the market.
To build its knowledge of the shoe market, with which he was absolutely not familiar, Polegato
started by giving out for free prototypes of GEOX shoes to children from the Montebelluna
region. Approximately 5,000 children aged of 3 to 6 were given shoes that they were to try
before large production was launched. Choosing the children segment was not an accident:
children wear out their shoes quicker than adults, which made feedback all the more quick and
enabled GEOX to move along the learning curve rapidly. From a marketing point of view,
targeting children also enabled GEOX to increase its brand awareness among parents: when it
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GEOX breathes: An innovation-based business strategy

comes to children footwear, the buyers are the parents and most parents went their children
to have shoes that are not only comfortable but also healthy -no parents want their children
to have deformed feet, most parents would be ready to pay a premium to ensure the
orthopedic development of their childrens feet-. Only when GEOX was famous enough in the
children market segment did the company move in the men market. Women were addressed
last because buying habits regarding footwear are more emotional for women that they are for
men -though the balance of the trade-off between fashion and comfort/healthiness is currently
changing-. To attract female consumers, GEOX had to develop its CRM expertise and to build
a production system flexible enough to make sure that the successful designs were indentified
and produced quickly enough to capture market share in the women footwear segment.
The same progressive strategy was used for international development. The company started to
establish its position in the Italian market before moving into neighboring European markets first Spain, France and Germany before moving to the UK and Poland-. GEOX does not move
into a new country before its position is consolidated with a significant market share through
third party distribution. Then the company builds its own retail network and starts attacking
the market leader by bringing out big guns as far as advertising and communication are
concerned. The companys latest international moves include the USA and Asia -mainly China
and Japan-. Today, thanks to its careful expansion strategy, the company does business in 68
countries -foreign sales amount to 60%, which are realized mainly in Germany, France, Spain.

GEOX Annual Report 2008. Section Consolidated economic, financial, and operational
highlights
2

The Sunday Times March 29, 2009; No sweat for the shoe maestro by Andrew Davidson

The Globe and Mail, May 25, 2009. Cool Innovation: The Sole of Italy by Carrie Cockburn

GEOX Annual Report 2008. Section Critical Success Factors

5 6

Breathing Shoes and Complementarities: How Geox has rejuvenated the footwear industry by
Arnaldo Camuffo, Andrea Furlan, Pietro Romano, and Andrea Vinelli.

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GEOX breathes: An innovation-based business strategy

Exhibit 1 GEOXs Mission and Corporate Values

Dynamism

Realism

Honesty

Integrity

To
offer
wellness
by
constant
development of new technologies at the
service of the general public in compliance
with interpersonal and corporate ethics.

Respect
for others

Sobriety in
behavior

Continuing
education

Sensitivity
towards
environment

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GEOX breathes: An innovation-based business strategy

Exhibit 2 GEOXs Financial Results for FY 2008

Source: GEOX Annual Report 2008

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GEOX breathes: An innovation-based business strategy

Exhibit 3 GEOXs timeline 1989-2008

1989
Early
1990s

From Morettis allergy to the sweaty feet to a business idea

Developed the first prototypes of a shoe with a holed rubber sole
Tested its prototypes giving away for free the shoes to the children orphanages
Developed the first line of shoes for children within a year

1995

Began to produce shoes for men and women

1999

Brought a solution that allows the hot air and humidity produced by the body to
vaporate

2000

Expands to international markets, starting in Europe

Geox laboratory created waterproof leather sole

2001

Launched its mono-brand points of sale

Established the Geox School to train employees

2004

Launched its successful IPO in the Milano Stock Exchange

2007

Sold in Dubai its line of transpiring military

2008

Faced a battle against well established shoe behemoths Adidas and Nike

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GEOX breathes: An innovation-based business strategy

Exhibit 4 GEOXs mono-brand stores

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GEOX breathes: An innovation-based business strategy

Exhibit 5 Footwear industry in Europe

Shoe value of production, export and import in Europe.
Year

Production Export

Import

Consumption

2002

900,535.00 214,348.00 1,232,914.00 1,919,101.00

2003

780,811.00 181,276.00 1,455,036.00 2,054,571.00

2004

728,211.00 170,085.00 1,709,875.00 2,268,001.00

2005

641,852.00 225,998.00 1,939,813.00 2,355,667.00

Source: Eurostat

Shoes importation flow in Europe in 2005

Number of
Country

Pairs

Growing

rate

Percentage (2002-2005)

World

1939813

100.0%

57.3%

China

1250802

64.5%

171.1%

Vietnam

265271

13.7%

-6.6%

Rumania

71467

3.7%

7.5%

India

52629

2.7%

45.9%

Indonesia

50772

2.6%

-18.8%

Brazil

30978

1.6%

105.2%

Source: Eurostat

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GEOX breathes: An innovation-based business strategy

Exhibit 6 GEOXs critical success factors

Technology

Focus on
the
consumer

Constant focus on the product with the application of innovative and

technological solutions developed by Geox and protected by patents.

Cross-market positioning for products, with a vast range of shoes for

men, women and children in the medium to medium/high price range
(family brand).

Brand
recognition

Strong recognition of the Geox brand thanks to an effective

communication strategy and its identification by the consumer with
the breathing concept

Internation
alization

A growing presence on international markets thanks to easy

replication of a business model already tried and tested in Italy.

Distribution

A network of mono brand Geox Shops in Italy and abroad which has
been developed according to each countrys distribution structure and
calibrated to the widespread network of multi brand clients.

Supply
Chain

A flexible delocalized business model with considerable outsourcing,

capable of efficiently managing the production and logistics cycle while
the Company maintains control over critical phases of the value chain,
so as to ensure product quality and timely deliveries.

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GEOX breathes: An innovation-based business strategy

Exhibit 7 GEOXs Blue Ocean Strategy

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GEOX breathes: An innovation-based business strategy

Exhibit 8 GEOXs position in the market

Source: Breathing Shoes and Complementarities: How Geox has rejuvenated the footwear
industry by Arnaldo Camuffo, Andrea Furlan, Pietro Romano, and Andrea Vinelli

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GEOX breathes: An innovation-based business strategy

Exhibit 9 Value Chain in Manufacturing industry

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GEOX breathes: An innovation-based business strategy

SOURCES OF INFORMATION
Magazines

Business: The Ferrari of Footwear; Italian Shoes, The Economist, March 13, 2004

Blessed Relief for Sweaty Feet; Ventilated shoes from Geox are winning fans -- and raking in
profits, Business Week,March 22, 2004

Flat-Footed, Forbes, November 29, 2004

Your Sole Provider, Newsweek, January, 10,2005.

Newspapers

Cool Innovation: The Sole of Italy by Carrie Cockburn (The Globe and Mail)

No sweat for the shoe maestro by Andrew Davidson (The Sunday Times)

Sole power: How Geox Changed the Footwear Industry by Julia Suppa (The Digital Journal http://www.digitaljournal.com/article/182707)

Management Articles

Breathing Shoes and Complementarities: How Geox has rejuvenated the footwear industry by
Arnaldo Camuffo, Andrea Furlan, Pietro Romano, and Andrea Vinelli. MIT

GEOX by Salvatore Sciascia.

Internet

GEOX website: http://www.geox.com/

GEOX Annual Report 2008

Video

http://factiva.everyzing.com/m/21600454/shoemaker-geox-runs-ahead.htm

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