Mkt 101 – G

Batingal, Marinella

Crisostomo, Monique

Ilustre, Annah Cassandra

Prado, Paula

ATENEO DE MANILA UNIVERSITY

Havaianas Aqua

A paper submitted in partial fulfillment

of the requirements in MKT101: Principles of Marketing

TO: Mrs. Maria Teresa Cano Lopez

BY: Batingal, Marinella

Crisostomo, Monique

Ilustre, Annah Cassandra

Prado, Paula

BS COMTECH

ON 14 October

2009

I. Marketing Background

A. Overview of the Industry

1. Market Size

In 2008, Euromonitor issued out a value of 2.98% or P137.6 billion of P4.607

trillion in total 2007 consumer expenditures on clothing and footwear in the

Philippines wherein 9.7% was spent on footwear amounting to P13.3 billion. It was

shown that from the review period of 1995 to 2007 spending on footwear went up

to 115.3%. Moreover, the Philippines tries to maintain a yearly requirement of

producing 46 to 51 million pairs. In fact, in 2006, the country made the footwear

sector as one of its main focus in developing industries as indicated by _______

Figure 1.7 Philippines Footwear Consumer Expenditures % Analysis/ % Growth

1995 2000 2007 1995-2007 2000-20076.9 9.4 9.7 115.3 45.6

Source: National statistical offices, OECD, Eurostat, Euromonitor International

Through the recent years, the world and Asia pacific footwear market has

steadily grown in terms of volume and value. In 2006, the world footwear retail

volume reached up to 6,989,852,700 units which equaled to the world retail value

of 201,903,100 US dollars. Furthermore, 50% of footwear sales come from women’s

footwear, 37% from men’s footwear and the rest on children’s footwear. The Asia

Pacific footwear retail volume reached up to 2,651,438,400 units which equaled to

46,986,800 US dollars.

Figure 1.1 World and Asia Pacific Footwear Market Sizes from 2001 to 2006

Source: Euromonitor International

Figure 1.2

Categori

es

Geographi

es

2001 2002 2003 2004 2005 2006

Footwea

r - Retail

Volume

- '000

units

World 5484737 5646936

.7

5860482

.4

6208749

.3

6580605

.2

6989852

.7

Footwea

r - Retail

Value

RSP -

US$ mn

World 157709.

5

156632.

3

171254.

9

186967.

5

195254 201903.

1

Footwea

r - Retail

Volume

- '000

units

Asia

Pacific

1863219

.9

2018589 2136789

.9

2255144

.4

2409672

.9

2651438

.4

Footwea

r - Retail

Value

RSP -

US$ mn

Asia

Pacific

37200.2 38090.1 40621.2 43771.2 45484.2 46986.8

Source: Euromonitor International

Figure 1.3

Source: Euromonitor International

Figure 1.4

Source: Euromonitor International

Figure 1.5

Source: Euromonitor International

Figure 1.6 Philippines Footwear Consumer Expenditures in Ps Billions

1995 2000 2002 2004 2006 20076.2 9.2 10.5 11.5 12.4 13.4

Source: National statistical offices, OECD, Eurostat, Euromonitor International

Sports footwear continues to dominate the footwear market. With casual

footwear renovating to a more sporty look, the sports or athletic footwear market

grows. Sports shoe brands such as Nike, Reebok, New Balance and Adidas have

showed to have greater market shares in the footwear industry. Nike tops them all

by being the single largest brand. It has become a recognized brand thanks to its

brand awareness efforts such as celebrity advertising and store merchandising.

Figure 1.6 Global Sales and Market Share of Athletic Footwear

Company Global Sales

Global

Market

Share (%)

Nike 6780 33.2

Reebok 1963 9.6

New Balance 1357 6.6

Adidas 3150 15.4

K-Swiss 480 2.4

Converse 905 4.4

Vans 395 1.9

Puma 1396 6.8

American Sporting Goods (Avia, Ryka, 303 1.5

Nevados, Turntec)

Asics 920 4.5

Keds/Pro-Keds 203 1

Foot-Joy 180 0.9

Fila 305 1.5

Saucony 141 0.7

Sole Technology 140 0.7

And 1 175 0.9

Mizuno 287 1.4

Hi-Tec 191 0.9

Brooks 126 0.6

Lotto 141 0.7

Other 873 4.3

Total 20411 100

Source: (Drbul et al. 2006)

2. Market Trends

More shoes for better earning Women

In the recent years, women have shown to be a rising number in the

workforce. With the growing education sector, women become more educated

opening more working opportunities and even higher incomes for them. Women

then opt for marrying at a later age since their careers have become a high priority

for them. On another note, better child care facilities are being offered which makes

it easier for women to join the workforce. With this, women enjoy increasing

incomes that obviously lead to greater consumer power.

Since women earn more, they also spend more. A mounting trend with the

women of today is retail therapy. To women, footwear has been an important item

to spend for. Subsequently, given the women’s priority for their careers, an

increased awareness has dawned on them of keeping fit and healthy for such a fast-

paced lifestyle. Athletic footwear has then become another priority in terms of their

range of footwear. Comfort and style are essentially valuable factors in their choice

of footwear.

Spending preferences of Young Adults

Aside from women, young adults have also opt to marry at later ages such as

their thirties. In effect, young adults have become big spenders of clothing and

footwear. Moreover, they tend to buy these more frequently and go for quality

products. In line with the influence of media, they have shown greater preference

for products that are fashionable and trendy. They have become less formal with

their clothing and footwear. Men prefer sportswear and women prefer to be less

formal.

Health concerns

Today, an obesity epidemic is emerging. According to the World Health

Organization, there are about 300 million obese people and approximately one

billion overweight people. In Asia, the Philippines is considered as the third fattest

population right after Malaysia and Singapore. There are approximately five

hundred thousand Filipinos who are obese.

These people have shown to have a particular need for better cushioned

shoes and other specialty footwear. Moreover, an increasing awareness of this issue

leads to interest in physical activities which, again, would pave the need for

comfortable athletic footwear.

Casualization: Western Wear Trend in Asia Pacific

Casual attire has been a favorite for various kinds of social settings. With

people’s changing mindsets in regards to fashion, casual attire has then become

acceptable in even formal settings like the workplace. More than that, casual attire

has become a general preference for dressing. Athletic footwear is a sure key item

in casual dressing since comfort and style continue to be significant elements.

Developing specific needs of consumers

Aside from the awareness of such brands, consumers have developed

specific needs for their activities. In response to this, companies have developed

specialty lines which specify whether the shoes are meant for running, biking, and

other categories. Product development has been ongoing to cater to these needs.

The development of new technologies for shoes widen the possibilities of generating

more products. For example, the Nike Lunar Glide provides a unique cushioning

system that would enable just the right support.

B. Market Profile

Everyday wear of sportswear for Filipinos has constituted as a big chunk of

the athletic footwear market. Furthermore, since there has been an amplified global

attentiveness on sports, Filipinos have become more adventurous in engaging in

different kinds of activities may it be sports or even social events. With all the

activities that the contemporary Filipino has to do, comfort becomes a big deal

breaker in every footwear purchase. Subsequently, this kind of comfort is usually

equated with athletic footwear as well as with new alternatives like Crocs and

Havaianas.

Footwear is purchased by all types of market segments varying in terms of

price and specific function. Slippers are indispensable in any household whatever

demographic the consumer may belong to. Athletic footwear also seems to be a

compulsory item for kids and teenagers since they need this for a required basic

subject, Physical Education. It is also one of the most used type of footwear since all

the different market segments engage in some kind of strenuous physical activity.

The purchase of other kinds of footwear would vary depending on the consumers’

taste and the occasion needed for.

Footwear could be bought through almost any distribution channel. It could

be purchased from marketplaces, malls, bazaars, online shops, direct sellers,

designers and the like. The increase of purchase of footwear would diverge

depending on the season and footwear type. Consumers would usually purchase

water-durable or water-intended footwear during summer or the rainy season. On

the other hand, consumers would usually find themselves occasionally buying the

whole year round out of whim or out of personal reasons.

Consumers still have as their footwear choice multinational brands such as

Nike, Adidas and New Balance which continue to lead the market. They are

considered leaders for the latest fashion trends and technologies. Moreover, their

incessant strong brand awareness efforts make them the major preferences when it

comes to footwear.

C. Environmental Analysis

1. Analysis of Opportunities and Threats

Opportunities

Availability of Sports through Media

With the media saturation today, sports has undeniably become more

available to people. Even with the issues of recession, sports has been an aspect

that people continue to pursue because of its usage as a stress buster. In fact,

according to the FDS International's Supporting Sport survey of 2007, 70% of

respondents from 16 countries claimed to be interested in sports in general. Given

this heightened interest in sports watching, an increased participation in sports is

inevitable which would lead to greater consumption of sporting goods especially

athletic footwear.

Fitness Hype

Due to the surge of sports awareness, greater consciousness is also bent on

fitness. Since Filipinos have been more concerned with leading healthy lifestyles,

they have been more intact of ways to become more fit. Thus, the emergence of

gyms, supplements, specialty drinks and the like. Most especially today, more and

more people are hitting the gym and engaging in physical activities. This doesn’t

just include the young and on-the go consumers. More than that, the Baby Boomers

are more apprehensive of keeping fit and healthy. They become a more attractive

market as fitness is now a high priority for them. Aside from that, they have more

money to spend on such a cause. They would then want to participate in different

kinds of physical activities whether it be running, skiing, swimming, scuba diving

and many more. Undeniably, athletic footwear is an anticipated necessity for

engaging in these different kinds of fitness endeavors.

Beach tourism

In the Philippines, there has been an increasing popularity of heading to

beaches. Most popular of these beaches are Boracay and Palawan. In line with this,

many Filipinos and foreign tourists become aware of the different offerings at the

beach especially water sports. Some of these water sports would include water

skiing, parasailing, windsurfing, wakeboarding and the like. For these off-the court

outdoor activities, a growing market is building up for athletic footwear that would

specifically cater to such activities.

Athletic translates fashion

Although a great number are interested in sports, this would not always

translate to them actually engaging in it. Some are just confined to consuming

sports simply by just watching it. Nevertheless, this inclination to sports influences

their choice of fashion. More than ever, celebrity athletes have proven to be icons

even in the aspect of fashion. This has pushed athletic footwear more to be

regarded as casual wear, thereby, increasing consumption by different generations.

Growing market for footwear

As of June 2009, the National Statistics office has issued that the Philippine

population numbers about 92,226,600 with gender distribution being almost equal.

As of 2005, teenagers, those in the ages of 13 years old to 19 years old accounted

for about 12,771 while young adults, those in the ages of 20 years old to 29 years

old accounted for about 15,125. Due to this, it has been expected that those in

these age brackets would produce a high demand for footwear.

Resilience of higher income segment to pricing changes

Despite the global economic crisis, high-end brands continue to progress. In

effect, other consumer goods manufacturers find that the higher income segment

shows to be an attractive group to focus on. It shows that basic necessities like food

and shelter aren’t the only expenses Filipinos value. The higher income segment

still proves to value brand equity and product quality. Given the high pricing for

famous footwear brands, these consumers continue to patronize it.

Increasing value of comfort to consumers

Nowadays, rather than going for just the design of the footwear, consumers

have become more particular of its fit. Comfort deems not only to be a factor but a

major clincher in their choice of footwear. True to this, there has been an evident

rise of footwear brands and lines that offer different kinds of specialized technology

intended for maximum comfort. For example, Crocs features their Croslite material

which “enables Crocs to produce soft, comfortable, lightweight, superior-gripping,

non-marking and odor-resistant shoes.”

Threats

Small slice of the budget pie for footwear

In the Philippines, consumers spend about an approximate 10% of their

income for clothing and footwear. Across all consumer incomes, it has shown that

consumers spend the same percentage for footwear. This could prove to be a

difficulty in increasing footwear volume and value.

Availability of cheap China-made footwear

Because of the presence of informal retailers like tiangges which offer China-

made footwear or counterfeits , they have been an emerging competition for

private labels. Due to the economic situation of the Philippines, Filipinos have

become more conscious of prices. Since these kinds of footwear are 50% - 80%

cheaper, these have been most especially favorable to those who have lower

income. Although, over time, it is expected that these consumers would eventually

prioritize better quality products.

Competitors going for same marketing strategies

Since most of the brands are riding on the same marketing strategies in

terms of product, price, place and promotions, it makes it hard for both competitors

and consumers to mark a distinction for the different products available in the

footwear market. By product, most of the competitors have been riding on the same

product features namely specialized technology. By price, competitors who go for

the same target market also have relative prices. By place, competitors have

stationed themselves in the same areas. By promotions, most competitors have

used sports to advertise its products.

2. Key Success Factors

Celebrity advertising

Celebrity endorsements and sponsorships are fundamental advertising

practices for market leaders such as Nike and Adidas. In the world and in the

Philippines, Nike gets sports celebrities as its brand ambassadors. Because of such

efforts, there is great awareness of these brands. Due to the values that brands

embody through such endorsements, many aim for these kinds of products.

Athletic footwear turned casual footwear

Athletic footwear deems to not only be limited to needs like physical

activities. Because of the changing trends in fashion, athletic footwear is now seen

as an option for casual wear. Moreover, there has been an increased penchant for

footwear that has comfort as a key feature. More people are then turning to athletic

footwear as necessary purchases fashion-wise and comfort-wise.

New Fashion Lines

There is no stopping to the various kinds of athletic footwear being developed

and manufactured. Many companies are developing new materials or technologies

that would make their products more appealing than just the average offering of

comfort and style. Furthermore, brands also try to keep up with other emerging

trends. For example, there has been the development of incorporating iPods with

footwear. Also, the creation of new fashion lines for different seasons garners as a

plus in offering consumers fresher concepts.

II. Competitive Analysis

A. Competitive Positioning

The group has chosen 4 main competitors in aqua shoes footwear namely Nike,

Adidas, Speedo and Keen. Nike, Adidas and Speedo are known for selling quality

footwear, thus having strong brand loyalty from customers. Keen is not well known,

but the group believes that Keen is the strongest competition to our proposed

product as they sell products that offer both design and function.

Nike basically promotes their aqua shoes as “second skin” of the foot. This is

because the strongest feature that their aqua shoes supposedly have is a very

strong grip. It is designed primarily to have strong grip and traction on wet surfaces.

Adidas promotes their aqua shoes as having a “360 degree cooling” for the entire

foot. The technology they used on their shoes is basically designed for comfort. It

also adds to the given feature of aqua shoes which is having good traction against

slippery surfaces. Speedo is mainly a company as focusing on water sports apparel.

They promote their products as “developing footwear from the inside out.” Their

footwear is designed to have overall function like complete breathability,

drainability, grip and comfort. Keen differentiates itself from the other competitors

as they offer eco-friendly products that are made out of recyclable and

biodegradable materials. Their aqua shoes for women are mainly promoted as

“sweetly feminine and uniquely functional.”

B. Market Shares/ Sales Volume/ Sales and Profit Trends

Based on the clothing and footwear retailers brand shares by value of 2005-2008

in the Philippines, Nike brand under Nike Philippines Inc. is the said market leader in

the footwear industry with a 2.2% sales value last 2008. Nike is at the same level

with Levi’s under Levi Strauss Philippines Inc. with also a 2.2% sales value last year.

They are followed by Adidas under Adidas Philippines Inc. with a sales value of

0.9%. Bench, Cinderella and Penshoppe each has a sales value of 0.7%. Hang Ten

and Rusty Lopez have 0.3% and 0.2% sales value respectively. Speedo under Sprint

International Inc. and Oygen each has a 0.1% sales value. Thus, all the other

competitors under clothing and retail footwear share the remaining 92% of sales

value last 2008.

So basically, if we focus on the athletic footwear industry, we can assume the

competitive positioning of our 3 main competitors. Nike as the market leader;

Adidas as the market challenger; Speedo as the market follower as it follows at a

distance; and the other companies which offer athletic footwear will fall under the

market nichers.

The following table will show only the 3 chosen main competitors in the athletic

footwear industry, along with their percentage of sales in value in year 2008.

Company 2008 Sales Value in

%

Nike Nike Philippines Inc. 2.2

Adidas Adidas Philippines Inc. 0.9

Speedo Sprint International Inc. 0.1

Source: Trade associations, trade press, company research, trade interviews,

Euromonitor International estimates

Based on the data showing the trends in clothing and footwear specialist

retailers in the Philippines, the specialist retailers are affected by the economic

downfall, thus resulting to a minimal sales growth at 4% and sales stand at Php92

billion. However, up-market brands or those international brands still stand strong

despite the challenges brought by the economic slowdown.

Well-known international brands such as Nike and Adidas stayed strong due to

their quality and higher loyal customer base. These brands maintained and even

increased their shares because of higher pricing strategies that they imposed. In

fact, Nike retained its leadership in the clothing and footwear retailers with sales of

Php2.02 billion. Levi’s followed Nike with its sales reaching to Php1.97 billion. These

brands focused on their image of providing higher and better quality of products

balancing their higher prices. Nike had the highest increase in share last 2008

because its customers were not affected by their pricing strategy. These

international companies will continue using their products with its brand name to

generate growth in sales.

The following tables show the value in sales and the growth in the value in sales

of clothing and footwear retailers in the Philippines from year 2003 to 2008.

Clothing and Footwear Retailers: Value in Sales from 2003-2008

2003 2004 2005 2006 2007 2008

Value

Sales

Php

million

75,863.7 78,367.2 81,110.1 84,273.4 88,487.0 91,584.1

Source: Official statistics, trade associations, trade press, company research,

trade interviews, Euromonitor International estimates

Clothing and Footwear Retailers: Value in Sales from 2003-2008: % Growth

2007/2008 2003-2008 CAGR 2003/2008 TOTAL

Value Sales Php

million

3.5 3.8 20.7

Source: Official statistics, trade associations, trade press, company research,

trade interviews, Euromonitor International estimates

C. Marketing Strategies

Product Price Place Promotions

Nike Nike Classic Aqua

Socks

* 4-way stretch

mesh

Php1,695 Nike Philippines,

Inc. (Makati City,

MM)

* 45 retail stores

nationwide

Endorsements

for famous

athletes. Like

for swimming,

Michael Phelps

Adidas Boat CC

* open mesh

Php1,995 Adidas Philippines,

Inc. (Pasig City,

MM)

* 45 retail stores

nationwide

Endorsements

for famous

athletes. Like

for swimming,

Ian Thorpe

Speedo Women’s Aqua

Jane Slip-On

Water Shoe

* slip-on with

elastic gore

Php2,388 Sprint

International, Inc.

(Muntinlupa City,

MM)

*17 retail stores

nationwide

Top female

swimmers like

Natalie

Coughlin and

Amanda

Beard. Also

endorsed

Michael Phelps

Keen Madrid Ballerina

* slip-on with a

ribbed mesh and

natural gum

rubber outsole

Php3,840 * consignments to

sports shops

specifically like

Toby’s

Planet Shoes, a

shoe retailer,

in association

with the

manufacturer

of Keen sells

Keen shoes

globally at

lesser prices

The previous table presented showed the 4 chosen competitors in the athletic

footwear industry along with their different marketing strategies for a sample of

aqua shoes that they have.

Product

Nike has an existing product designed as aquatic footwear named Nike Classic

Aqua Socks. The product is designed to have a very strong grip that would feel like

the “second skin” of your foot. Embedded is a soft sock liner that adds comfort for

engaging in water sports activities. It also offers grip and traction on wet and

slippery surfaces. Adidas’ existing aquatic footwear is called Boat CC. Its design is

based on the classic boat shoe. CC stands for ClimaCool, a technology which

provides “360 degree cooling for the entire foot.” It is basically designed for comfort

through its synthetic lining and slip-on construction. One of its features is the water

grip outsole to give good traction even on wet and slippery surfaces. Speedo is very

much focused on swimming apparel and footwear. Thus, they offer a lot of different

aquatic footwear. One of which is the Women’s Aqua Jane Slip-On Water Shoe. For

its rubber sole, they used a technology called Hydro Tread that offers maximum

traction and water dispersion. The product also offers 360 degree ventilation. It is

also constructed as a slip-on with elastic gore for a more secure fit. Keen promotes

Madrid Ballerina through the shoes’ femininity and function. The natural gum rubber

outsole gives protection and comfort in walking through different landscapes.

Each company had uniquely labeled and named their aqua shoes. The

competitors din not show a clear system on the packaging used on their aqua

shoes, except that mainly their shoes are packaged in large conventional boxes.

Speedo uses recyclable cardboard sourced from Forest Stewardship Council (FSC)

certified well-managed forests. For some products, the boxes contain product

information.

Price

The price range for aqua shoes range from Php1,500-4,000. Among the

competitors, Nike offers the lowest price. Adidas’ is priced higher than Nike’s aqua

shoe. Speedo’s aqua shoes prices differ by the features of the shoes that they sell.

Same as for Keen, the prices also differ depending on the kind of aqua shoes since

both Speedo and Keen offer a wide range of aqua shoes. The prices differ

depending on the technology used on the shoe and the size and quality that they

give. Basically, aqua shoes with fewer materials used are priced cheaper than those

which are made up of different materials that would help the shoes perform better.

Promotions

The promotion strategy of Nike is mainly through endorsing famous athletes

from different sports. Nike offers a lot of sponsorship arrangements with different

famous athletes like Michael Phelps, which Nike offered recent endorsements to for

their swimming apparel. They also appoint their athletes to be their brand

representatives in different countries worldwide. Basically, they cater to younger

customers worldwide. Adidas followed the same promotional strategy as of Nike’s.

Adidas also focused on sponsoring and endorsing celebrity athletes and thus also

focusing on the younger customers. They have endorsed world champion swimmer,

Ian Thorpe. Just like the other athletic apparel companies, Speedo associate and

promote their products through endorsing top swimming athletes like Natalie

Coughlin and Amanda Beard who have competed wearing Speedo. Keen had a

different approach, being known for producing eco-friendly products. Planet Store, a

retail brand store with the same advocacy of recycling and using biodegradable

materials, tied up with the manufacturer of Keen and decided to sell their products

globally at a cheaper price.

Mainly, companies try to create much brand awareness through the use of

celebrity and sports advertising. Most especially in the season for particular sports,

some brands such as Nike and Adidas launch huge campaigns to incorporate it in

their products. In the Philippines, Adidas tied up with UAAP teams to make use of

their products. It would then help increase the demand for athletic footwear in the

season for that particular spoor. People usually show a greater following for

sportswear during these times.

Place

There is a big number of Nike retail stores in our country. Just like Nike,

Adidas has the same number of retail stores nationwide. Speedo has the lowest

number of retail stores in our country compared to Nike and Adidas. Keen sells

using stalls located in different sports shops.

Athletic footwear is very accessible since they are available in department stores

and sports specialty stores. The multinational brands would sometimes have their

own specialty stores which would usually have a wider range of product lines

compared to the department stores. Aside from malls, they have also situated

themselves in some gasoline stations. On a different scale, Filipinos who are more

price-sensitive may fall back to imitations of such brands. An evident showcase of

this is the presence of such products in local market places, tiangges and known

bargain places such as Greenhills and Divisoria.

D. Strengths and Weaknesses of Competition

Athletic footwear had the highest market share in the previous years. Nike is

the leading brand while Adidas was one of the sport footwear companies to

contribute in topping the market shares. They have strengthened their brand equity

due to the different advertising and marketing strategies imposed by these

companies. Stronger relationships between customers were built, thus creating high

income from their customers. The strong branding of the top sports companies

stabilized the uprising challenge brought by the idea of private labels being the way

to gain profit and increase sales. This idea of private labeling is a concern to brand

manufacturers because it caused price wars that decreased the average unit prices

of products.

The main promotional strategy of the leading athletic footwear companies

like Nike and Adidas is the numerous endorsements and sponsorships by

contracting agreements with big sports celebrities. Sponsorships have become the

normal advertising and marketing strategy which will result to customers’ higher

recognition of brands. Companies’ focusing on endorsing these athletes is a

strategy that will surely continue and grow. However, a downside here is if the team

or the athletes endorsed perform poorly, the brand would also be affected.

Nevertheless, spending on these endorsements and costly advertisements did a

great effect on the sports companies like Nike and Adidas as they were accountable

for the growth of sports apparel as the clothing trend among youth today. Due to

the strong effect of endorsements and marketing strategies done, huge sports

events have increased the value of the brands of the different sports companies to

their target young customers. Even to the extent of different controversies being

thrown at some companies like Nike, sporting events still continue to increase

Nike’s value to their target market due to the sponsorships and endorsements they

make. For a fact, the 2 leading sports apparel manufacturers, Nike and Adidas, top

footwear sales.

Different manufacturers are also constantly improving their products as new

technologies are continuously being instilled in different kinds of athletic clothing

and footwear, like Hydro Tread and Clima Cool in aqua shoes. These are all done

due to the main purpose of providing comfort and efficiency in the said products.

However, the companies would thus price their products higher because of the

updated technologies applied in their products. This would probably weaken the

competition as the buyers are becoming more price conscious.

Another weakness is that all of the competitors fall under clothing and footwear

industry, not mainly on the athletic footwear industry. Basically, they have a larger

range of products to sell, thus not focusing only on athletic footwear. The

companies’ sales on footwear compete with their own sales on clothing.

Nevertheless, it is still important that clothing and footwear retailers are now in

fact dominating the distribution of clothing and footwear, and will continue to be the

most important distributing channel of retail.

With aqua shoes, based on the competitors’ strategies on selling specifically

athletic footwear, there is a very weak competition in selling aqua shoes or casual

beach footwear since all the leading competitors, Nike, Adidas and Speedo, are not

giving much attention to it. For Nike and Adidas, they are more focused on selling

shoes for training, more like running shoes and those that are used for land training

especially. That could be seen on their advertisements as they usually spend more

on advertising basketball shoes and clothing. Speedo offers a narrower or more

focused range of products as the company caters mainly on athletic swimming

apparel. Among the group’s chosen competitors, only Keen offers a number of

products which offer both design and function. Since only a small number of

sporting shops are offering and focusing on selling swimming apparel, opportunities

in selling clothing and footwear specializing in casual swimwear would probably

increase due to the less number and strength in the competitors.

III. Company Background

A. Company Profile

SÃO PAULO ALPARGATAS S.A.

São Paulo Alpargatas S.A., is a leading international

branded company that started in Brazil more than 100

years ago. Though it is best known for its Havaianas thong

sandals, it also turns out various kinds of footwear, sports

clothing and other sporting goods, and a range of international textiles. It also

operates a chain of retail stores and is active in property development. The

company is then divided into four business units – Sandals, Sporting Goods,

Industrial Textiles and Retail.

The company’s origin dates back to 1884 when Juan Echegaray and Robert

Fraser founded S.A. Fábrica Argentina de Alpargatas in Buenos Aires to produce a

version of alpargatas, traditional Spanish light sandals worn by peasants and

laborers. As they brought this footwear to Brazil in 1907, São Paulo Alpargatas S.A.

was founded and production immediately began the year after. Since then, the

company has gone through times of glory and decline, from being forced to stop

their production and to close several factories because of market crashes and

recessions to being the biggest textile conglomerate in Brazil with $422 million

revenue and 30,000 employees. Over time, it has introduced various lines of

clothing and footwear such the well known Havaianas flip flop in 1962, Madrigal

bedspreads in 1967 and US Top faded jeans in 1972, among others. It has also

bought competing companies such as Raihna Calça dos e Materiais Esportivos Ltda.

and Jeaneration. Moreover, it has acquired license to manufacture and sell top

brands like Arrow, Polo/Ralph Lauren, Van Heusen, Timberland Co. and Mizuno Corp.

Vision

To be a world class company with desired brands of sport products, shoes, and

industrial textiles.

Mission

To develop and commercialize innovative, world class and profitable products of

high perceived value and quality and to create value for shareholders, employees,

suppliers and customers through socially and environmentally responsible

operations.

Business Philosophy

Old: To turn out more goods, at lower prices, of the products in which it specialized

changed in 1989 due to the economic crisis in Argentina

New: To seek products with major brand recognition.

São Paulo Alpargatas S.A. intended to become more a service than a manufacturing

company, concentrating on marketing and on supervising the logistics of

distribution

Organizational Structure

São Paulo Alpargatas’ organization consists of Board of Directors, Board of

Auditors, Internal Auditing, CEO, and seven departments: Sandals, Sporting Goods,

Retail, Industrial Textiles, CFO, Human Resources, and Operations.

The Board of Directors has six members, four representing the controlling

shareholder and two are elected by the minority holders of common and preferred

shares. They are responsible for monitoring the execution of established policies to

define the organization’s strategy.

The Board of Auditors consists of five members; three are nominated by the

controlling shareholder and two by the minority shareholders. They are responsible

for the deliberation of management reports and financial statements.

Executive officers are those responsible for running the businesses and to

ensure that São Paulo Alpargatas pursues its established objectives. Also, to

execute deliberations of the Board of Directors.

Figure 3.1 Organizational Chart

Office Locations

Brazil

□ São Paulo – Head Office

□ Manaus – Synthetic Fabrics

□ Natal – Sports Footwear

□ Santa Rita – Sports Footwear

□ Campina Grande – Havaianas Sandals

□ Carpina – Dupé Sandals

□ Pouso Alegre – Coverings and Tarpaulins

□ São Leopoldo – R&D Center

Argentina

□ Buenos Aires – Head Office

□ Florencio Varela – Footwear and Textiles

□ Corrientes – Textiles

□ Saenz Peña – Textiles

□ Tucuman – Footwear

□ Catamarca – Footwear and Textiles

□ San Luis – Footwear

□ Santa Rosa – Footwear

Uruguay

□ Dolores – Footwear

Chile

□ Santiago – Subsidiary

United States

□ NewYork – Subsidiary

Alpargatas - Head Office

St. Funchal, 160 - Vila Olímpia

Campina Grande (PB)

Havaianas Sandals

Av. Assis de Chateaubriand, 4324- Distrito Industrial

B. Current Position of the Company/Brand in the Market

São Paulo Alpargatas S.A. has been establishing itself as a top quality

manufacturing and retail firm, catering to the high end market with products costing

twice as much as similar brands. It is one of the leading companies in the industry

and last 2007, it was given numerous awards and acknowledgements by several

institutions.

□ Best Company in the Apparel and Textile Sector, from Exame magazine’s

Maiores e Melhores

□ Best Company in the Textile, Leather and Apparel Sector from the Valor 1000

ranking published by the newspaper Valor Econômico

□ Best Company in the Textile, Leather, Footwear and Apparel Sector,

fromBalanço Anual magazine, published by the newspaper Gazeta Mercantil

□ Best Company in the Apparel Industry Sector, from the magazine Financial

Officer

□ Most Admired Company in Brazil in the Sporting Goods Category, from the

Carta Capital / TNS InterScience survey in the magazine Carta Capital

□ Most Admired Company in the Footwear, Leather and Accessories Category,

from the newspaper Diário do Comércio, Indústria & Serviços.

Domestic operations of São Paulo Alpargatas S.A. are increasing their market share

as of the 1st quarter of 2009 while international operations are currently at an initial

growth stage. The company’s strategy of investing in people, sourcing,

manufacturing operations, logistics, brand communication, research and

development and information systems resulted in long-term profitability and value

generation.

Table 3.1 Net Sales Revenues

Brazilian GAAP 2008 1st Q 2009

Net Sales Revenues 439.3 455.9

Domestic Operations 345.5 340.8

International Operations 93.8 115.1

Alpargatas Argentina 86.4 92.5

Alpargatas USA and Europe 7.4 22.6

Table 3.2 International Operations

Consolidated International Operations

Alpargatas Argentina, USA and Europe

Brazilian GAAP

1st Quarter 2008 1st Quarter 2009

Net sales revenues (R$ million)

93.8 115.1

Sales volume: (000’s of pairs)

Havaianas 1,017 1,278

Topper and other footwear brands

2,476 2,285

Figure 3.2

C. Company Strengths and Weaknesses Analysis

STRENGTHS WEAKNESSES

• Pioneer and original,• Global, large-scale production and distribution• Strong products and brand names• Huge and powerful company that can buy out competitors• Has a huge following• Knowledge on the target market

• Prone to imitations• Sole manufacturer• Limited advertisements

D. Brand Consumer Profile

Identified Market Segment

Since Terry S.A. Incorporated brought Havaianas in the Philippines in 2003,

the company perceived that there is a ready market for Havaianas because using

rubber slippers is common to Filipinos. It caters to all ages and gender, offering a

wide range of slippers with different styles, designs and colors. Yet, it is geared

more towards the high end elite market as the slippers cost a little less than a

thousand pesos as compared to the locally made cheaper brands that are even less

than a hundred bucks. It has turned into a status symbol than a commodity.

The bulk of the Havaianas Philippines’ market are women, accounting for

70% of the buyers. Men compose 20% and the children at 10%.

Market Needs Being Addressed

More than just being rubber slippers, Havaianas represents three F’s thus

making it the leading brand of flip flops in the country.

Source: http://www.havaianasphilippines.com/original/wearoriginal.php

Buying Patterns

Havaianas has a huge cult following in the Philippines that some of its buyers

have gone so far to making it as a hobby with collections ranging from 30 to 250

pairs. It has become close to the hearts of the Filipinos that they want so much of it

as it makes them feel good. Despite its relatively high cost for a rubber slipper,

Filipinos are still inclined into buying them. Having at least one pair means

something for them; more so, since it has turned to a status symbol already.

Usage Habits

Havaianas has indeed transformed the local perception of flip flops. From

being the lowly plain footwear for home and beach, it has become a wardrobe

essential that are now proudly worn anywhere and everywhere. It is paired with

almost everything from bikinis and board shorts, jeans and shirts and even the

dressier pieces.

E. Present Marketing Strategy

Segmentation, Targeting and Positioning

Segmentation

Havaianas goes across all market segments. It has products for all ages with

varied styles and colors to match different personalities and lifestyles of people.

Targeting

Havaianas is geared more towards the high end market but is not limited to

that. Though it is still more expensive than the department store variety, it has

changed over time to accommodate the needs of the customers. It had set the

trend and targets people who wants to be fashionable and trendy.

Positioning

Havaianas has established itself as one of the first class rubber slippers that

people would spend on over the locally produced and imitations of the brand.

Despite its high price, it promises quality that is sure worth every peso spent on it.

Furthermore, it offers products that are not only fashionable but also durable and

reliable.

Marketing Mix

Product

Havaianas hails itself as the best rubber flip flops in the world. They are made

of a patented rubber formula by Sao Paulo that makes it ultra-comfortable and

highly durable. A single factory in Brazil exclusively manufactures the slippers and

all the other offices around globe are just distributors.

The flip flops’ soles and straps come in varying colors such as dark brown,

navy blue, black, magenta, gold, silver, royal blue, cyanic blue, tomato, white,

forest green, pumpkin, blush rose and lavender blue, among others. There is also

room for customization through an event called Make Your Own Havaianas which is

conducted roughly once a year in different areas in the Philippines. There they can

mix their preferred colors of soles and strap then embellished it with various pins

and Swarovski crystals.

Price

Havaianas is indeed quite pricey as compared to the other brands of slippers being

sold in the market. The price ranges from 400 to 700 pesos for the children’s line

and 600 to 1,400 pesos for the adult collection. Special collections may also be

available at a higher retail value. These retail prices are standard for all the

authorized retailers in the country, as dictated by Terry S.A.

Place

Havaianas flip flops are available throughout the globe. In the Philippines,

Terry S.A. Incorporated is its exclusive distributor and the only one authorized to

market the brand. The slippers are then made available to the public through

reputable establishments and retailers that are carefully selected and discerned by

both Terry S.A. and Sao Paulo so as to ensure the brand’s integrity and the

protection of its trademark.

They are not currently being sold through the Internet but the Havaianas

Philippines website can help you find stores where you can find the pair you want.

Not all styles and collections are available in all stores since the supplies in each

store vary from what they actually order from Terry S.A. There are also some

special collections that are exclusive to certain outlets. Furthermore, the collections

sold in the Philippines depend on the styles made available by Sao Paulo to the

country, based on the carefully crafted marketing strategy of Terry S.A.

Currently, there are 116 authorized Havaianas retailers in the Philippines and

below is the complete list of them.

METRO MANILA AREA ALABANG : All Flip-Flops 2/F New Wing, Alabang Town Center Alabang-Zapote Rd., Muntinlupa City 807-7145; 809-0617 Celio UG/F, Alabang Town Center Alabang-Zapote Road, Muntinlupa City 850-4153 Kidsports UG/F, Alabang Town Center Alabang-Zapote Road, Muntinlupa City 807-5816 Rustan’s Department Store Alabang Town Center 850-5532 Stoked

Alabang Town Center 772-1763

MAKATI CITY: Aloha Boardsports 3/F Power Plant Mall, Rockwell Center, Makati City 837-0118 All Flip-Flops 2/F Greenbelt 5, Ayala Center, Ayala Avenue Makati City 729-9322 2/F Glorietta 3, Ayala Center, Ayala Avenue Makati City 818-2508 Celio 1/F, Greenbelt 3, Ayala Center, Ayala Avenue Makati City 757-4926

J&S Surfshop 2285 Don Chino Roces Ave. 893-5766 Manila Polo Club 17 McKinley Rd., Forbes Park, Makati City 817-0951 loc. 258 Moana 1/F Power Plant Mall, Rockwell Center, Makati City 756-5104 Nail Spa Gamboa St., Legaspi Village, Makati City 817-3128; 830-0702 Orange Juice The PowerPlant Mall Rockwell Center 757-5096 Rustan’s Department Store Rustan‘s Dept Store, Ayala Center 813-3739 Stoked The PowerPlant Mall Rockwell Center 856-4013 The Zone 7221 Malugay St. cor, Gil Puyat Avenue, Bel-Air Village, Makati City 894-0087

MANDALUYONG: All Flip-Flops E 317 SM Mega Atrium, SM Megamall Mandaluyong City 637-0989/638-5944 Celio 2/F, Shangri-La Plaza Mall, Shaw Boulevard Mandaluyong City 634-5402 Kidsports 4/F, Shangri-La Plaza Mall, Shaw Boulevard Mandaluyong City 633-6948 Nail Spa 2nd level, Shangri-La Plaza Mall, Shaw Boulevard Mandaluyong City 687-4991 Rustan’s Department Shangri-la Plaza Mall, Shaw Boulevard 633-4636 Souk 2nd level, The Ramp, Crossing Department Store, Shangri-La Plaza Mall, Shaw Boulevard 635-4410

MANILA: Rustan’s Department Store Robinson’s Place Ermita 551-2788 All Flip-Flops 1/F Robinson‘s Place Midtown, M. Adriatico St. Ermita, Manila 567-2203

ORTIGAS/GREENHILLS: Orange Juice Virra Mall, Greenhills Shopping Center 725-1244

Stoked 4th floor, The Podium Mall 683-0736 2nd level, Bridgeway, Greenhills Shopping Center 723-9286

PASAY CITY: Stoked Ground level, SM Mall of Asia 556-0146 All Flip-Flops 2/F Entertainment Mall, SM Mall of Asia Roxas Bay Blvd., Pasay City 556-0639 Celio 2/F, Main Mall, SM Mall of Asia Roxas Bay Boulevard, Pasay City 556-0095

QUEZON CITY: All Flip-Flops Level M2 Trinoma, EDSA cor. North Avenue Quezon City 901-3978 All Flip-Flops Unit 213, 2nd level, SM Fairview Annex Quezon City Celio 1/F, Gateway Mall, Araneta Center Cubao, Quezon City 912-0247 Fiveforty Surfshop 227 Katipunan Ave., Quezon City 437-4816 Kidsports Level M2 Trinoma, EDSA cor. North Avenue Quezon City 901-3970 Nail Spa 5th floor, The Block SM North Edsa 441-0323 Rustan’s Department Store Gateway Mall Araneta Center 911-2401 Stoked 2nd level, Trinoma Mall 916-9708

TAGUIG CITY: All Flip-Flops Unit 960 and 962 Bonifacio High Street Fort Bonifacio Global City, Taguig 856-1390, 0906-578-3349 ROX Bonifacio High Street, Fort Global City 856-4639 Sepatu 2/F Market Market 322nd St., Brgy. South Side Fort Bonifacio, Taguig City 844-5544 Stoked Bonifacio High Street, Fort Global City 898-1913

Souk 2nd level, Serendra Piazza, Fort Bonifacio Global City 907-7040

LUZON AREA PANGASINAN: Tutti Footie Eastgate Complex, 231 AB Fernandez East, Dagupan City

BAGUIO CITY: All Flip-Flops Patria de Baguio EXT., Session Road Baguio City (074)442-5712 High Tide Store Special Economic Zone, Camp John Hay Baguio City (074)4460886

LAOAG: Red Dot Boutique 72 F.R. Castro Ave. Laoag City, Ilocos Norte (077) 771-1437

LA UNION: San Juan Surf Shop San Juan Surf Resort, Urbiztondo San Juan, La Union (072)720-0340

PAMPANGA: All Flip-Flops Lot 1 Robinson’s Star Mills O.G. Rd San Fernando, Pampanga (046)636-3565

LAGUNA: All Flip-Flops Paseo de Sta. Rosa, Sta. Rosa, Laguna (049)541-2087, 0916-331-8623 Fashion Outlet Sta. Rosa, Laguna (049)541-2087

SUBIC: Royal Subic Duty Free 1109 Palm St., Subic Bay Freeport Zone Olongapo City 0917-521-5141

VIGAN: Red Dot Boutique Syquia Bldg. cor. Men Crisolog St. Heritage Village. Vigan City, Ilocos Sur. (077) 632-1168

TUGUEGARAO: Red Dot Boutique 16 College Avenue, Tuguegarao City

SOUTHERN LUZON BATANGAS: All Flip-Flops G/F SM City Batangas, 194 Pallocan West Pastor Village, Batangas City (043)783-0454 All Flip-Flops G/F SM City Lipa, Ayala Highway Lipa City, Batangas (043)757-4074 H Kape Maharlika Highway, Lipa City, Batangas (043)312-6289

BICOL: All Flip-Flops G/F SM City Naga, Central Business District, 2 Triangulo, Naga City (054)495-5055 Evolution Salon and Day Spa G/F Villa Caceres Hotel, Magsaysay Ave., Naga City (054)811-1192 Soleil et Lune 2/F Avenue Square, Magsaysay Ave., Naga City (054)473-6611 Wardrobe and Me 3/F E-Mall, Elias Angeles St., Naga City F2M Pacific Mall, Legaspi City, Albay (052)480-0828 Hotel Venezia Renaissance Gardens, Washington Drive, Legaspi City, Albay (052) 481-0877

QUEZON PROVINCE: Mug Cafe Pacific Mall, Lucena, Quezon (042)660-4200

BORACAY All Flip-Flops by the Beach Station 1, Balabag, Boracay Islang, Malay, Aklan (036)288-1544 (036)288-1545 Fridays Resort Panglao Island, Bingag, Dauis, Bohol (036)288-6200 Latte Sta. Monica, Andagao, Kalibo, Aklan (036)268-9026 (036)268-6000 Nami Resort Diniwid Beach, Boracay Island, Malay, Aklan (036)288-6753 (036)288-6754 Discovery Shores Station 1, Boracay Island, Malay, Aklan (036)288-4500 Waling-Waling Station 1, Balabag, Boracay Island, Malay, Aklan

(036)288-5556 (036)288-5557 Regalo Boutique Shangri-la’s Boracay Resort and Spa, Barangay Yapak, Boracay Island (036)288-4988

CENTRAL AND EASTERN VISAYAS CEBU: All Flip-Flops G/F North Wing, SM City Cebu North Reclamation Area, Cebu City (032)236-0985 All Flip-Flops G/F Paseo Ciudad, Ayala Center Cebu Cebu City July 2/F Ayala Center Cebu, Archbishop Reyes St. Cebu City (032)412-5724 Republik G/F Banilad Town Center, Gov. M. Cuenco Ave. Banilad, Cebu City (032)231-5641 What A Girl Wants 2/F Ayala Center Cebu, Archbishop Reyes St. Cebu City (032)415-6136 Rustan‘s G/F Level 1, Ayala Center Cebu, Archbishop Reyes St., Cebu City (032)231-5641 Meddah Spa CrossRoads, Banilad, Cebu City

DUMAGUETE: Hayahay 211 Flores Ave., Piapi Beach, Dumaguete City

MACTAN: Abaca Boutique Hotel Abaca Boutique Hotel, Punta Engano, Mactan (032)495-3461 Maribago Bluewater Beach Resort Maribago Blue Waters Resort Gift Shop Maribago, Mactan (032)492-0100 Plantation Bay Resort and Spa Plantation Bay Resort & Spa Dive Shop Marigondon, Mactan (032)340-5900

ORMOC CITY: Tshilly’s G/F Ormoc Villa Hotel, Obrero St., Ormoc City

BOHOL: Panglao Island Nature Resort Pangloa Island Bingag, Dauis, Bohol (038)411-2599 Amorita Resort Easter A. Lim Drive, Brgy. Tawala, Pangloa, Bohol

TACLOBAN: 7R Store Salazar St., Tacloban City, Leyte

WESTERN VISAYAS BACOLOD: Learning Gallery G/F Lourdes Center, Lacson St., Bacolod City (034)423-2699 Pink Elephant G/F Parking Annex Bldg., Lopue‘s East Center Carlos Hilado National Highway, Bacolod City (034)433-9280 Seed 2/F Robinson‘s Place Bacolod, Mandalagan Bacolod City Carlos Hilado National Highway, Bacolod City (034)441-0558

ILOILO: All Flip-Flops LG/F SM City Iloilo, Sen. Benigno Aquino Jr. Ave. Mandurriao, Iloilo City (033)329-2346 Seed G/F Robinson’s Place Iloilo Iloilo City

NORTHERN AND WESTERN MINDANAO BUTUAN CITY: Cirrus Lifestyle Haven 1342 Sentro Bldg., JC Aquino St., Butuan City (085)815-5264

CAGAYAN DE ORO: All Flip-Flops SM City CDO, Materson Ave. cor. Gran Via St. Cagayan de Oro City, Misamis Oriental (088)859-2335 Ban Sabai Traditional Thai Massage Corrales Ave. Cor Ramon Chaves St. Cagayan de Oro City, Misamis Oriental (08822)714-032 Gazebo A. Velez St. corner Gaerlan St. Cagayan de Oro City, Misamis Oriental 088-857-4667 Mallberry Suites Business Hotel Florentino St., Limketkai Center, Cagayan de Oro City, Misamis Oriental (088)854-9999/ (08822)72-4999 Spruce 2/F Limketkai Center, Rosario St. Cagayan de Oro City, Misamis Oriental (088)856-2234

DIPOLOG CITY: Myx Boutique General Luna St. cor.Ortega St., Dipolog City

ILIGAN CITY: Shelves & Hangers

Juan Luna St., Iligan City, Lanao del Norte (063)223-2652 Street Shop Quezon Avenue Extension, Iligan City Lanao del Norte (063)221-6335

MARAWI CITY: My Tiny Closet Panggao, Saduc, Marawi City

OZAMIZ CITY: Spruce G/F Medina Bldg, Gallardo St. Ozamiz City 088-5215982

SURIGAO CITY: Pieces of a Dream Stall No. 6 City Commercial Bldg., Borromeo St., Surigao City

ZAMBOANGA CITY: The Sidewalk 3/F Southway Sq., Gov. Lim Ave., Zamboanga City

SOUTHERN AND EASTERN MINDANAO COTABATO CITY: Bajunaid 20 Biruar Bldg., Bonifacio St., Cotabato City (0917)708-1889

DAVAO: All Flip-Flops SM City Davao, Quimpo Blvd. cor. Tulip Dr., Ecoland Subdivision, Brgy. Matina, Davao City (082)282-0977 Apo View Hotel G/F 1510 J. Camus St., Davao City (082)221-6430 Bliss Salon and Day Spa G/F Lanco Corporate Center, J.P. Laurel Avenue Davao City (082)225-5677 Chimes Specialty Store Sales St. (0918)942-4639 Choo Choo Baby G/F Gaisano Mall, J.P. Laurel Ave., Davao City (0918)910-3079 Jill & Co. G/F Victoria Plaza Mall, J.P. Laurel Ave., Bajada, Davao City (0917)717-0885 Martish Store Villa Margarita Hotel, J.P. Laurel Ave., Davao City (082)221-5674 Sunlab 2/F Gaisano Mall, J.P. Laurel Ave., Davao City (082)305-2902

KORONADAL CITY: Mia Lee’s Boutique

(0926)447-5357

SAMAL ISLAND: Pearl Farm Boutique Pearl Farm, Kaputian District, Island Garden, City of Samal (0920)917-1640

Promotions

In the Philippines, there are no television and radio advertisements for

Havaianas. Most of the promotions are done through print ads in various magazines

and events that they host and sponsor. Every year, there’s the Make Your Own

Havaianas event where Havaianaticos, avid users of the brand, can customized

their own pair of flip flops. They also had Havaianas Playback that relieved Filipino

street games.

Havaianas is also effective in creating a bandwagon to promote the use of its

slippers. Names of famous celebrities who are spotted wearing them are being

spread, particularly through word of mouth and their actual pictures. Moreover, they

make use of their website, mailing lists and various fanbase sites so they can

interact and keep in touch with their customers.

As to how successful are they in promoting the brand, the long lines to their

stores who even needed bouncers and velvet ropes to control the crowd are just

enough proof.

Competitive Strategies Employed

According to Anne Arcenas-Gonzales, managing director of Terry S.A., they at

Havaianas are not worried with the current deluge of competition. They even see

this as an advantage since it brought more attention to the industry as a whole.

Furthermore, even if there’s a lot of variety to choose from now, they are banking

on the brand’s popularity and superior quality that will make the consumers still

choose them over the others. Rather, what threatens them more are the existence

of imitations and the availability of the same products sourced via parallel

importation. With this, they are planning to release 20 to 25 new styles every two

months to encourage more buyers. They also try to find out what their customers

want in their Havaianas and make them closer to their hearts. Just recently, they

added a Pinoy touch to its flip flops with a theme “Put some Pinoy soul into your

step.” Whatever changes and makeovers Havaianas undergoes, they assure that

the “flexibility, grip, and comfort that has made Havaianas not just a flimsy fashion

trend but a dependable and durable footwear essential that will last for years to

come” will be constant no matter what. Moreover, they have been establishing a

loyal group of consumers that they even organize parties for them as a way of

giving back. Also, people who are subscribed in their mailing lists get the privilege

of being informed with their promos and events first.

III. Identified Market Opportunity

The Philippines have shown to be a country with changing lifestyles given the

increasing awareness with health and fitness opportunities. Add to that, the

Philippines has presented itself to be a venue wherein beaches have been local

hotspots especially for the young adults generation. Yet, the beach has also been

shifting its image from being just a vacation destination to being a pleasure haven

for water sports as well.

Since women have been marrying at later ages and prioritizing their careers,

there is an increase of value for their own needs and wants. Women in general are

known to be big spenders of footwear since they equate it as their necessities or

pleasure items. In fact, shoes are just some of their rewards for themselves. With

their increasing incomes, they become more gracious of spending for things other

than their daily basic necessities. They have also developed different types of

leisure activities so as to compensate with their stressful lives such as the pursuit of

fitness. Essentially, Filipino females have been an emerging sector with an

increasing consciousness for fitness. Moreover, they have also become more

adventurous in trying out sports that would usually be ventured out by males like

water sports. Given the increasing popularity of such activities, Filipino females

generate a higher demand for goods that would complement and aid them with

such endeavors especially goods such as footwear particularly water shoes.

As of now, market leaders Nike, Adidas and Speedo have been the brands

known to consumers to provide water shoes that would precisely answer athletic

needs. Havaianas, Sanuk, and Crocs are the brands consumers go to for a more

casual yet fashionable choice of beach footwear. Still, Nike, Adidas and Speedo

present itself as more of a functional product. On the other hand, Havaianas, Sanuk

and Crocs just pose themselves as comfortable and stylish footwear without

meeting actual sports related needs, in this case, water sports.

Nikole, age 29, is on a company trip at Boracay. She wants to try

riding the Banana Boat. However, Nikole is worried that she might lose

the flip-flops that she is wearing and if she uses her sneakers, she’s

afraid that it might get ruined when she gets thrown off the banana boat.

Sandra, age 25, is in Puerto Galera during the Christmas holidays.

As she is swimming on the beach, she noticed that there are sea urchins

on the waterbed. Afraid of stepping on one, she decides to wear her flip-

flops to the water. Oh no! Her flip-flops floated on the water. She ended

up going bare foot. The next day, she borrowed her friend’s flip-flops that

had a strap. Confident of the slippers, she started swimming and walking

in the water. When she reached the corals, she stubbed her toe on one of

them.

Angeli, age 13, is in Palawan with her family for a vacation.

Although she likes the ocean, she doesn’t like the scorching hot sand.

Even while wearing her flip-flops, she can still feel the hot sand going in

between her toes giving her rashes.

Ella, age 19, owns a pair of aqua shoes. She knows of the shoes’

benefits and uses, and thinks that it is practical for wearing in the beach.

However, she noticed, her aqua shoes doesn’t go with her bikini, summer

dress, and other beach wear. Also, the designs available in stores for the

With these various selections in the footwear market today, many females

still have concerns regarding the footwear that would best adjust to their lifestyles

at the beach.

The modern active Filipina, most especially young adults and teenagers,

continues to have fashion and personal style as her prevailing major factors in

footwear purchasing decisions. Nevertheless, she needs more than the usual

footwear that would provide her with the standard comfort and style. In pursuing

her active lifestyle at the beach, she also needs footwear that would deliver

optimum performance. She is faced with compromising function with style.

Havaianas Aqua jumps on the opportunity of delivering the balance of both for the

modern active Filipina.

Since Havaianas has established itself as a brand known for its comfortable

and fashionable footwear not only for the beach but for other casual occasions as

well, it differentiates itself away from only catering to athletes. As other sports

brands have been focusing on promoting itself as an athlete brand, Havaianas has

posed itself as brand for everyone who has sense for the trendy and the efficient.

Although Nike, Adidas and Speedo have focused more on the athletic needs of

women, they have not established themselves so much as a go-to for the fashion

concerns of women. Havaianas shows as a friendlier choice for females who are not

that keen with sports in general. Given this, a wider range of women of different

personalities would be more in touch with Havaianas Aqua. Add to that, Havaianas

Aqua directly wants to address the fashion needs of women who engage in water

sports. It also introduces aqua shoes as another alternative for casual beach

footwear. Moreover, with Havaianas being popular for its quality and fresh colorful

designs, it proves to be an ideal brand for the fashion-conscious and the brand-

conscious.

V. Proposed Target Market

A. Demographics

POPULATION FemaleCIVIL STATUS Preferably SingleSOCIAL STATUS Middle-Income to High-IncomeEDUCATION Private SchoolingAGE 13-29

The proposed target market is the female population in the Philippines. From

there, Havaianas Aqua will be targeting those females aged 13-29, considered to be

teenagers and yuppies. As for the social status, Havaianas Aqua will be targeting

those belonging in the middle class and in the high class. It would also target single

women since they have more tendencies to be more active than those who are

married – a factor that that we highly regard in advertising our product.

The proposed product can be pricy for most consumers so Havaianas Aqua

will only target those with higher income. Since it is targeting the middle-income

class and the high-income class, the group assumes that these females are

currently studying or have experienced private schooling. Also, it can be assumed

that students from exclusive schools are more exposed to our company and the line

of products it offers. The proposed target geographical segment is expected to hold

the highest average annual family income and expenditure, and among all the

regions based on our research, it is NCR.

Average Annual Family Income and Expenditure by Region 1997 to 2006 (in PhP)

Region 2003 2006

Average Average Average Average

Income Expenditur

e

Income Expenditur

ePHILIPPINES 148,000 124,000 172,730 147,180

NCR 266,0

00

218,000 310,860 257,930

CAR 152,0

00

126,000

192,1

26

150,508Ilocos 124,0

00

102,000

142,3

58

123,502Cagayan

Valley

126,0

00

99,000

142,7

70

117,889Central Luzon 160,0

00

138,000

197,6

40

170,347Southern

Tagalog

184,0

00

158,000

209,7

49

186,287Bicol 103,0

00

84,000

108,9

46

92,999

Region 1997 2000

Average Average Average Average

Income Expenditure Income Expenditure

PHILIPPINES 123,168 99,537 144,039 118,002

NCR 270,993 217,840 300,304 244,240

CAR 112,361 86,924 139,613 110,338

Ilocos 102,597 83,307 120,898 95,755

Cagayan Valley 86,822 68,556 108,427 88,655

Central Luzon 133,130 105,558 151,449 120,003

Southern

Tagalog

132,363 104,002 161,963 135,043

Bicol 77,132 67,012 89,227 77,287

Source: National Statistics Office

The middle-income class could be defined as those

families with annual income ranging from P148,307 to

P1,207,122 in 1997; P178,468 to P1,449,295 in 2000; and

P203,109 to P1,651,632 in 2003. For 2007, the range

should be from P251,283 to P2,045,280.

Source: Trends and Characteristics of the Middle -Income

Class in the Philippines: Is it Expanding or Shrinking? By

Romulo A. Virola, Mildred B. Addawe and Ma. Ivy T.

Querubin

Basically, based from research, urban women with higher education

belonging to a higher economic status delay marriage. Therefore, Havaianas Aqua

is planning to target those who are single because of the more opportunities given

for them to be more active in activities, like particularly in our case, water sports

activities, going to different beaches and other aquatic activities.

Median Age at First Marriage by Background Characteristic

BACKGROUND

CHARACTERISTIC

1993 1998 2003

RESIDENCEUrban 22.3 23.0 22.9Rural 20.7 21.0 20.9REGIONNCR 24.0 24.0 23.8CAR 22.3 24.0 21.5I 22.2 21.9 22.1II 20.4 20.3 20.9III 21.5 22.1 22.1IV 21.4 22.1

IVA 22.7IVB 21.0V 20.8 21.5 21.4EDUCATIONNo Education 18.9 18.7 18.2Elementary 19.6 19.8 19.6High School 21.1 21.5 21.2College or higher a a aWEALTH INDEX

QUINTILELowest 19.7Second 20.6Middle 21.5Fourth 22.8Highest 24.6TOTAL 21.4 22.1 22.0

a - omitted because less than 50 percent of women married for the first time before

reaching age 25

Source: National Demographic and Health Survey: 1993, 1998 and 2003

Another component in the proposed target market is the age group which we

Havaianas Aqua is advertising to. The group is planning to focus on teenage girls

and female yuppies or female young adults, aged 13-29. Younger generations and

young adults during their leisure time tend to participate more in different sports

activities since they are more active and are usually more physically-capable to do

different kinds of activities. The proposed product caters to water sports enthusiasts

or those active in going to different beaches to enjoy different aquatic activities.

The group assumes that more consumers will be coming from this age range

because of the number of activities that they do and the higher amount of

activeness that they give. A huge factor in the target market is the proposed target

gender, which are females. Since our product, Havaianas Aqua, focuses on

functionality and design, the group believes that women could be the best market

to cater to. It is functional for women because Havaianas Aqua would enhance the

comfort and ensure safety of the feet in aquatic environments. Women tend to be

more careful of their feet so that it would not get cut, bruised or even smell bad. For

design, women are more attracted to the vibrant colors and images that would very

well relate to our company’s advertisements. Also, the company’s advertisements

are much seen on fashion magazines that are usually read by women. The product

would also focus on the design to adhere to the company’s trend of creating fashion

statements through footwear. Basically, the different concepts of Havaianas Aqua

would draw more attention to the female population rather than the male

population.

5-Year Interval Population

Year Both Sexes MALE FEMALE2000 76,504,077 38,524,267 37,979,8102005 85,261,000 42,887,300 42,373,700Source: National Statistics Office

Population by Age Group, by Sex and by Region: 2000 (proposed target age)

Age Group Both Sexes Male Female10-14 8,949,614 4,541,197 4,408,41715-19 8,017,298 4,017,830 3,999,46820-24 7,069,403 3,522,518 3,546,88525-29 6,071,089 3,053,616 3,017,473Source: National Statistics Office

B. Psychographics

Social Class Class A & BAge Group Teenagers and People in their 20sActivities Studying (School), Working (Office), Going out for

social gatherings and events, Social networking,

Shopping, Sports Activities, Out of town tripsInterests Latest fashion trends, Sports, Travelling, Leisure and

RecreationOpinions “Being fashionable is cool”, “I want to be in the

trend”, “I should get the most out of my money”, “I

have to look and feel good”, “I want to have fun and

just be carefree”Personality Characteristics Wants to be ‘in’, Fashion-forward, Practical, Modern,

Active, Fun-loving, Sociable, Strong decision and

purchasing power

Havaianas Aqua particularly targets female teenagers to young professionals

of Class A & B. They are those who seem to afford having a work-leisure balance in

their lifestyle. They can be really busy with school or work but they still find time to

have fun and a bit of rest and relaxation once in a while. They go to the mall, party

with their friends, do sports and even go out of town especially during long weekend

holidays. They are active and fun-loving. These people are also the ones who have

tendencies to follow trends as they feel the need to be sociable. Psychology says

that within this age range that people strive to look for their own identity and a

certain group they can belong to. Moreover, these people have a strong decision

and purchasing power so they can go buy almost anything they want. Though

teenagers still get their money from their parents, they relatively have full freedom

with their purchases. Young professionals, on the other hand, do not have much

responsibilities to pay for so they still can spend their earned money for their own

whims.

The group then see that these people are the ones most likely to buy and

actually use Havaianas Aqua. As they go to the beaches of nearby towns and

provinces, they can wear these aqua shoes and totally enjoy the water as they

would not bother about their feet getting hurt from the rocky and slippery surfaces.

They can be completely carefree and just have the fun they want. Furthermore,

they can wear these ultra fashionable aqua shoes to match their equally stylish

swimsuits. Havaianas Aqua would surely be a perfect fit for chic and trendy girls

who just love to have fun.

C. Behavioral

Even though the need for aqua shoes would probably arise during Summer,

Havaianas Aqua places itself as a product for any season. Essentially, Havaianas

Aqua is a key footwear item for beach trips since this is the primary setting for this

product. However, it also acknowledges an arising need for this footwear not only in

beach settings but also in other settings where water sports may be carried out.

Occasion Beach Trips, Water Sports Activities

Benefits Sought Quality, Comfort, Function, Added Protection, Fashion,

Trend, Social Status, Antibacterial Feature User Status Potential User / First Time User

User Rates Heavy User

Brand Loyalty Hard Core Loyals (buy all the Havaianas products of

every design and color always/most often) Soft Core

Loyals (buy one or two pairs of Havaianas always/most

often)Loyalty Status Absolute / Strong

Readiness Stage Interested

Attitudes Toward

Product

Positive, Enthusiastic, Interested

Add to that, Havaianas Aqua also presents itself as a need for those who regularly

go to the beach or those who regularly engage in water sports.

Females, being generally fashion-conscious, go for athletic footwear that

would offer both function and style. Following the trends become vital for females

since this translates what the mass population believes as fashionable. Moreover,

many females choose their brand of footwear based on its prestige and popularity

since this would equate to social status and quality. With their increasing awareness

of developments of new technology, comfort, protection and other plus features

have become more of a clincher for footwear purchasing decisions. Havaianas Aqua

aims to nail down the market of those who seek or are not even aware of these

benefits.

Havaianas Aqua intends to tap further into Havaianas’ already existing strong

cult following. It presents itself as another choice to satisfy any other concerns that

they might have from their regular flip flops.

D. Geographic

Country PhilippinesRegion National Capital Region (NCR)Cities Manila, Mandaluyong, Marikina, Pasig, Quezon, San Juan,

Malabon, Navotas, Valenzuela, Las Piñas, Makati,

Muntinlupa, Parañaque, Pasay, TaguigCity or Metro Size 636 sq. km.Population Density 15,617 per sq. km.Climate Tropical Climate

The proposed geographic segment for Havaianas Aqua is the Philippines,

specifically the National Capital Region (NCR). The National Capital Region’s cities

are ‘Highly Urbanized,’ with ‘1st class’ income classification as described by NSCB.

NCR is also the center for Philippine commerce and includes the cities of Manila,

Mandaluyong, Marikina, Pasig, Quezon, San Juan, Malabon, Navotas, Valenzuela, Las

Piñas, Makati, Muntinlupa, Parañaque, Pasay, and Taguig.

City Province City Class Income

ClassCITY OF MANILA NCR, CITY OF MANILA, FIRST

DISTRICT

Highly

Urbanized

Special

CITY OF

MANDALUYONG

NCR, SECOND DISTRICT Highly

Urbanized

1st Class

CITY OF MARIKINA NCR, SECOND DISTRICT Highly

Urbanized

1st Class

CITY OF PASIG NCR, SECOND DISTRICT Highly

Urbanized

1st Class

QUEZON CITY NCR, SECOND DISTRICT Highly

Urbanized

Special

CITY OF SAN JUAN NCR, SECOND DISTRICT Highly

Urbanized

1st Class

CALOOCAN CITY NCR, THIRD DISTRICT Highly

Urbanized

1st Class

CITY OF MALABON NCR, THIRD DISTRICT Highly

Urbanized

1st Class

CITY OF NAVOTAS NCR, THIRD DISTRICT Highly

Urbanized

1st Class

CITY OF

VALENZUELA

NCR, THIRD DISTRICT Highly

Urbanized

1st Class

CITY OF LAS PIÑAS NCR, FOURTH DISTRICT Highly

Urbanized

1st Class

CITY OF MAKATI NCR, FOURTH DISTRICT Highly

Urbanized

1st Class

CITY OF

MUNTINLUPA

NCR, FOURTH DISTRICT Highly

Urbanized

1st Class

CITY OF

PARAÑAQUE

NCR, FOURTH DISTRICT Highly

Urbanized

1st Class

PASAY CITY NCR, FOURTH DISTRICT Highly

Urbanized

1st Class

TAGUIG CITY NCR, FOURTH DISTRICT Highly

Urbanized

1st Class

Source: National Statistical Coordination Board

The Philippines is an ideal market for Havaianas Aqua because of its long

summers and the presence of many beaches. The National Capital Region is ideal

for the proposed target market because all of its cities are urbanized and has total

population of more than 9 million. NCR also has an annual growth rate of

2.25% and has around 2,132,989 households.

National Capital Region (2000)Total Population 9,932,560Ave. Annual Growth Rates 2.25% (1990-2000)No. of Households 2,132,989Average Household Size 4.62Land Area 636 sq. km.Population Density 15,617 per sq. km.No. of City / Municipality 16No. of Barangays 1,694Source: 2000 Census of Population

VI. Marketing Objectives

A. Overall Marketing Objectives

Havaianas Aqua aims to introduce aqua shoes as part of the Havaianas

brand. Aside from flip-flops, the Havaianas brand is well known for beach and

casual footwear that is both durable and comfortable. Taking advantage of this, the

group aims to take part in the athletic footwear industry that provides aqua shoes.

The goal of Havaianas aqua for the next 3 years is to establish aqua shoes as a

staple beach casual wear for women ages 13- 29.

In terms of sales, the group expects the aqua shoes to be profitable and have

a increase in sales by the end of the third year. Havaianas is already a well known

and established brand in the Philippines. With the introduction of Havaianas Aqua,

Havaianas will add to their already existing market and have more than flip-flop

customers as their regular clientele.

The current competitions for aqua shoes, Nike, Adidas, and Speedo, are not very

aggressive in terms of advertising their aqua shoes line. On the other hand,

Havaianas aqua will stick with Havaianas’s current promotion strategy and will offer

the brand to the cities of the National Capital Region: Manila, Mandaluyong,

Marikina, Pasig, Quezon, San Juan, Malabon, Navotas, Valenzuela, Las Piñas, Makati,

Muntinlupa, Parañaque, Pasay, and Taguig.

Objectively, for the first 2 years, Havaianas Aqua will focus on establishing the

product. For the third year, the group expects that Havaianas Aqua will be ‘picked

up’ by the Philippine market and thus, the company can start distributing the brand

to other urbanized cities in the country.

B. Specific Objectives and Targets (3 years)

2010 2011 2012Market Share 0.2% * 0.2% * 0.2% *Sales Php

873,602,650.96

Php

889,501,813.30

Php

905,682,855.69Profit Php

221,687,013.08

Php

221,751,277.70

Php

206,189,748.74Distribution SM, Robinson’s,

Ayala Malls,

Powerplant

SM, Robinson’s,

Ayala Malls,

Powerplant

SM, Robinson’s,

Ayala Malls,

Powerplant, Local

malls in provincesArea NCR NCR NCR, Cebu,

Palawan*Based on Terry S.A. Inc. (Havainas Philippines)

Based on the Terry S.A. Inc. income statement for year December 31, 2008,

sales reached Php205,018,894 for 2007 and Php231,337485 for 2008. Comparing to

Nike’s 2008 sales and market share on clothing and footwear retailers of

Php2,000,000,000 and 2.2% respectively, we have established the market share of

Havainas Philippines, which is 0.2%. For the next 3 years, we are expecting the

company to maintain its market share of 0.2%.

The group is proposing to sell the aqua shoes for Php 1,699 for solid colored

aqua shoes and P1,999 for printed aqua shoes, so the median price is about Php

1,849. Based on our survey, 60.98% of the target market size is willing to buy

Havaianas Aqua. The target market size for 2010, 2011 and 2012 are 774,800,

788,901 and 803,252 people respectively. So given the percent of buyers, target

population and the median price, the group developed an objective sales growth for

2010-2012. There is also a computed cost given the expected cost of sales,

operating expense and advertising expense. Therefore, there is a developed income

for the next 3 years.

For the next two years, Havainas Aqua will be focusing on retail stores in

NCR, specifically at malls where a big number of people go to and also we will focus

on high-end malls. For 2012, Havaianas Aqua will be selling at local malls in the

provinces. As for area, the focused target area is NCR since all the factors the group

is considering for the proposed target market is found mostly from people located in

NCR. For 2012, the company will be expanding its network to Cebu and Palawan

since they have many islands and beaches that tourists go to. Cebu and Palawan

are also considered as highly urbanized areas.

Basically, Havainas Aqua is promoting casual beach footwear that is both

durable and comfortable. Havainas, our company, will sell these aqua shoes with

variations of design every season, just like what they normally do with their flip

flops. Havainas Aqua will be distributing to selective areas only, mainly high-end

and highly-urbanized markets. The group also expects the loyal consumers of

Havaianas to still support the proposed product, but it will be attracting new users

as well. As for advertising strategies, the group will continue with what Havainas is

doing right now – through word of mouth, sponsoring events and magazine

advertisements.

VII. Overall Marketing Strategy

“To active and fashion-forward teenagers and young professionals who frequently

go to the beach and engage in water activities, Havaianas Aqua is the aqua shoes

that will give the right covering and protection for your feet while keeping you chic

and trendy. With Havaianas Aqua, you can walk, swim and play on the beach

confidently, safely and in style.”

The aqua shoes that are currently available in the market seem to be

primarily targeted for water sports enthusiasts who of course need much protection.

These shoes normally just come in plain colors with barely any design at all. They

are just but aqua shoes. Though the athletes may not be really concerned with the

shoes’ overall look, they are not just the ones who need aqua shoes to protect their

feet. Practically everyone who goes to the beach need them including people who

are very much concerned with how fashionably they look like.

Havaianas is particularly known for its colorful and vibrant trendy flipflops

and so is how the aqua shoes would look like. Unlike the ‘usual’ aqua shoes,

Havaianas Aqua would be offered in a diverse range of styles, prints and colors so

as to cater to the varying preferences of people. They would be made through the

powerful combination of the authentic premium Havaianas rubber and a special

kind of fabric that will surely ensure comfort, warmth and protection for one’s feet.

The soles would be hard enough on the outside for extreme protection but would be

very soft inside for greater comfort. They could also have removable straps for

flexibility of the user’s preferences and the product’s functionality. Being very chic

and trendy, we want people not to just wear Havaianas Aqua on the beach but even

on normal days as well. They could indeed be very reliable especially during the

rainy season. As for the packaging, they would come in a clear transparent plastic

box so people can readily see them with their fabulous designs that are absolutely

worth noticing. There would also be a shoe bag so users can conveniently bring

them to the beach or wherever.

Promotion-wise, Havaianas Aqua will stick with the current strategies of the

brand. Advertisements would be placed in teens, young women, fashion, travel and

sports magazines. They could also sponsor school fairs and parties and even water

sports competitions and events. The brand will reach out to our prospected

customers by being involved with the events their customers go to and products or

media that they use, still no television or radio ads. Hopefully, the shoe line would

still be made known by word of mouth or even through bandwagon as celebrities

and the high end populace wear them. Such people are known to sport branded

clothing and footwear and since Havaianas is a popular high end flipflop brand, they

are likely to try them on and influence more people.

So as not to be far from competition, Havaianas Aqua would be sold for

Php1499 to Php1999 depending on its style and design – the simpler and not

printed ones for Php1499, the printed and more colorful for Php1699 and the special

and limited seasonal designs for Php1999. They may be indeed quite pricey but

they would surely be worth all your cents being the fashionable and reliable aqua

shoes that they are.

These aqua shoes would still be distributed by Havaianas main distributor in

the Philippines, Terry S.A. Inc. and would be sold in all the Havaianas retailers in the

country. For the flagship and other big stores like All Flip Flops in Bonifacio High

Street, Havaianas Aqua would have an accent wall of beach background. Such wall

would have floating shelves displaying the current styles of the shoe line. For all the

others where Havaianas is just consigned, Havaianas Aqua would be displayed in

racks or maybe even a small wall, depending on the store’s policies and

arrangements.

VIII. The Marketing Mix

1. Product

Figure 3.1.1. Logo

The Havaianas aqua shoes product name will be Havaianas Aqua. As with

previous Havaianas products, the brand name is followed by the product design

name. The logo, as shown in Figure 1, shows the Havaianas brand name and the

product design name, Aqua, in a wavy script.

a. Product Strategy / Positioning

“To active and fashion-forward teenagers and young professionals who frequently

go to the beach and engage in water activities, Havaianas Aqua is the aqua shoes

that will give the right covering and protection for your feet while keeping you chic

and trendy. With Havaianas Aqua, you can walk, swim and play on the beach

confidently, safely and in style.”

The scorching hot sand, slippery and rocky surfaces, as well as strong waves in the

beach often prove to be a problem for women’s footwear. For the modern woman,

these problems may be solved by aqua shoes. However, the styles and colors

available are unable to suit their tastes. Havaianas Aqua shoes give women aged

13-29, a more fashionable alternative to the current aqua shoes available in the

market today. It gives their foot proper protection but with style and comfort.

b. Product Description / Features / USP

i. Product Description

The Havaianas brand is known for its colourful and vibrant flip-flops. The brand

represents three Fs: Fashion, Function, and Fun. The Havaianas brand is not limited

to the beach or swimming pool. They are versatile and can be worn on different

occasions.

Havaianas Aqua comes in seven different styles and ten colors. Each style comes

in solid colors and both solid colors with printed patterns. These styles are

comfortable, durable, versatile, and stylish.

They are made of sports mesh fabric, microfiber nylon fabric, neoprene, rubber

outsoles and insoles. The sports mesh provides a breathable and cool feeling for

the feet. The microfiber nylon fabric gives the aqua shoes the flexibility it needs.

The neoprene fabric is commonly used for wetsuits in scuba diving and wading

boots for fishermen for its warming effect. Medical support braces also use

neoprene. (See appendix for Neoprene Color Chart)

Havaianas Aqua Coast

• Solid and/or

Printed

• Garter strap to

hold the shoe in

place

• Available in 10

colors

Havaianas Aqua Pearl

• Solid colors:

white, pink, black

Havaianas Aqua

Breeze

• Solid and/or

Printed

• Cool breathable

design

• Shoe loop for

easy clothesline

hanging

• Available in 10

colors

Havaianas Aqua

Cabana

• 2-tone colors

• Cool breathable

design

Havaianas Aqua Coral

• Solid and/or

Printed

Havaianas Aqua

Stream

• Solid and/or

Printed

• Diagonal garter

strap

Havaianas Aqua

Shore

• Solid and/or

Printed

• Criss-cross

garter design

• Shoe loop for

easy clothesline

hanging

Havaianas Aqua will follow Havaianas’s current range of sizes. Its smallest size in US

size is 3 and its largest is size 10.

Brazil US

Women 33/4 3

35/6 4/5

37/8 6/7

39/0 8/9

41/2 10

ii. Features

Havaianas Aqua are aqua shoes that gives its users’ feet protection while keeping

them chic and trendy, not compromising their style. Havaianas Aqua is still stylish

and versatile enough to be used even when not on the beach. It features 10

different colors: red, yellow, green, blue, orange, violet, brown, black, white, and

gray. Havaianas Aqua’s insoles are equipped with anti-bacterial properties that will

keep bacteria that causes odor to accumulate. It is also very soft to provide comfort

to the user’s feet. The shoes’ rubber outsoles on the other hand, is hard enough on

the outside for maximum protection.

iii. Unique Selling Proposition

Compared to other brands like Nike, Adidas, and Speedo; Havaianas Aqua’s shoes

offers style, comfort, protection, and durability to its users. Though concentrating

more on style, Havaianas Aqua does not compromise the athletic aspect of aqua

shoes and presents adequate qualities similar to those of well-known aqua shoes

brands. Havaianas will prove to be ‘Fashionable yet reliable aqua shoes.’

c. Packaging

Every Havaianas Aqua shoe will come with the tag shown in Figure 3.1. The tag has

a black base color similar to the original Havaianas slippers tag. It’s made out of

matted carton paper and it will feature the aqua shoes’ style name, size, and seal of

authenticity.

Figure 3.1.2. Shoe Tag

Front Back

The Seal of Authenticity is the quality assurance that Havaianas provides to

its consumers that what they’re buying is genuine Havaianas. It also assures the

buyer that the product is imported and made from Brazil.

Figure 3.1.3.

Figure 3.1.4.

Style name

Logo

Size

Seal of Authenticity

Havaianas Aqua would come in a clear plastic box (Figure 2) to emphasize

the shoes’ colourful design. The clear plastic box also represents water, which

coincides with the primary function of aqua shoes. The box’s length is 3.5 in x 10.75

in and has a width of 5 inches. Havaianas Aqua will not only come in a clear box,

but also in a shoe bag so it can be conveniently brought anywhere. The shoe bag is

made of nylon fabric in a shade of blue and designed with different sizes of circles

forming a sun with the Havaianas Aqua logo at its center. (See Figure 3.1.4.)

Figure 3.1.2.

Figure 3.1.3.10.75 in

3.5 in

5 in

Figure 3.1.4. Shoe Bag

2. Pricing

a. Pricing Strategy

Our group will mainly use value-based pricing and pricing strategies based on

competitors. Our group will focus on good-value pricing strategies as our product

offers a fair price for both good quality and service. Also, value-added pricing will be

12 in

9 in

used as our product offers added features with corresponding charging of higher

prices.

A pair of Havaianas Aqua will have a suggested retail price of Php 1,699.00

for shoes with solid color designs and Php 1,999.00 for shoes with printed

designs. The prices of shoes with garters do not differ from those without since

the cost of the garter is only minimal. Compared to our competitors, Havaianas

Aqua offers a fair price, not the cheapest, but not the most expensive as well.

The prices we have set only range from Php 1,000-2000 since based the survey

we have conducted, 88% of the respondents are willing to spend only Php 1,000-

2,000 for aqua shoes and 83% of the respondents are also willing to spend only

Php 1,000-2,000 for Havaianas Aqua.

The prices set are also cheaper compared to most of our competitors since

Havaianas Aqua is neither specifically athletic shoes nor specifically casual

shoes. Our proposed product is mainly casual shoes bordering athletic, so it

doesn’t serve a specific purpose unlike for example Speedo which best serves

swimmers or athletes, thus having a more expensive price since they offer

special technology in their water shoes for the athletes.

Havaianas Aqua shoes with printed designs are set with higher prices since it

offers a variety of patterns and designs which customers can choose from.

Havaianas, our main company, has an existing pricing strategy of charging

higher prices for printed designs of flip flops, thus our group plans to follow this

kind of strategy of setting higher prices for shoes with printed designs compared

to those shoes which have solid color designs only.

These prices are priced fairly since Havaianas Aqua has a good quality given

that our group would be using materials that are already guaranteed to have

best features, like the Havainas rubber formulated to have extreme comfort and

durability. Even if the demand for aqua shoes is low, our group depends on the

existing loyalty and support of customers with the trusted brand of our company.

Also, based on our survey, most of our correspondents are willing to try out

Havainas Aqua due to the trusted brand and quality of products that our

company offers, which mainly gives us enough reason to set a fairly high price

for our proposed product. There would be a standard suggested retail price for

all stores.

Retail price (solid colors): Php 1,699.00

Retail price (printed): Php 1,999.00

b. Detailed Product Costing

MATERIAL COST (a pair of aqua shoes)Rubber Outsoles Php 61.63Insoles Php 96.00Sports Mesh Fabric per foot Php 128.16 Microfiber Nylon Fabric per sq.foot Php 60.00Neoprene per sq.foot Php 411.36Nylon Lycra for the strap per

3inches

Php 35.40

TOTAL MATERIAL COST Php 792.55COST HAVAIANAS AQUA (pair)Materials Php 792.55Packaging (clear plastic box) Php 239.52Cost of Production Php 100.00TOTAL PRODUCT COST Php 1,132.07

The cost of the specialized synthetic rubber was computed from the financial

statement of Terry S.A., the distributor of Havaianas here in the Philippines. The

other costs of the materials were computed from the research based on the usual

materials used to make aqua shoes. The cost of production was based on the

researched article about the cost of production of Havaianas flip flops.

c. Index vs. Competition

COMPAN

Y

PRODUCTS

Nike Php 1,695

Classic

Aqua SocksAdidas Php 1,995

Boat CCSpeedo Php 2,399

Hydro

Trainer

Water

Shoe

Php 959

Wave

Walker

Zip

Php 863-

959

Surfwalker

2

Php

1,535

Aqua

Jane

Water

Shoe

Php

1,151

Shore

Cruiser

Water

Shoe

Php

1,535

Aqua

Jane Slip-

on Water

Shoe

Php

1,679

Hydro

XP Pro

Keen Php 1,920

Roatan

Php

4,800

Cimarro

n

Php 3,840

Madrid

Ballerina

Php

3,840

Madrid

MJ

Php

3,600

Sienna

MJ

Php

4,320

Erin

BallerinaHavaiana

s Aqua

Php 1,999

Coast

Php

1,999

Shore

Php 1,999

Breeze

Php

1,699

Caban

Php

1,999

Coral

Php

1,999

Stream

Php

1,699

Pearl

a

3. Place

a. Distribution Strategy

Havaianas Aqua will be using the same distribution strategy of Havaianas since they

will be sold in the same retail stores as the flip flops. It will be distributed by Terry

S.A. Incorporated, the brand’s exclusive distributor in the Philippines and the only

one authorized to market the brand. Terry S.A. was acknowledged to be the Best

International Distributor for 2008 by Sao Paulo Alpargatas so it is more than assured

that they will also effectively distribute Havaianas Aqua. The retailers are carefully

selected and screened by both Terry S.A. and Sao Paulo so as to ensure the brand’s

integrity and protection of trademark hence, the quality and authenticity of the

products would be well guaranteed.

Unlike the other brands that sell aqua shoes, particularly Nike and Adidas,

Havaianas Aqua won’t be pulled out after the summer season but rather would be

available all year round, with its styles and designs to be updated regularly. It is the

shoe’s premise that they would be stylish enough for them to be used not only for

athletic and beach-related summer activities but also for casual day-to-day wear so

it should really be available throughout the year. Furthermore, with our problem of

global warming and climate change that causes unpredicted rains and

thunderstorms here and there, Havaianas Aqua should readily be at the line of sight

in times of need like this. Accessibility would be a key factor in the distribution so as

to fit the active and busy lifestyles of the target market.

b. Distribution Scheme and Trade Channels

From the production in Sao Paulo Alpargatas in Brazil, Terry S.A. have the exclusive

rights to distribute Havaianas Aqua to the authorized retailers in the country, which

will then make the shoes available to the market. Currently, there are 116 of them

and

presented below is the breakdown of the number of stores per region.

As per the terms and agreements of the distribution, the availability of the shoes in

the retail outlets will depend on the orders placed by the stores themselves.

Therefore, there is a probability that not all of these retailers would be offering

Havaianas Aqua. Strategically, though, they would be made most available in the

outlets near the beach like those in Boracay and the huge stores in all urban areas

in the country, specifically Metro Manila, Cebu and Davao, where its target market

is more likely to be found – teens and young professionals of Class A and B, who

frequently go to the beach.

4. Promotions

a. Overall Promotion Strategy

Being an established pioneering brand in the Philippines, the brand name Havaianas

already serves as a major promotion strategy for the new product line, Havaianas

Aqua. Given the success of the promotion efforts of Havaianas Flip flops, Havaianas

Aqua will also bank on the same promotion strategies. However, since aqua shoes

are relatively unfamiliar to the general public, as shown through this paper’s survey,

Havaianas Aqua aims, at the same time, to increase awareness of such a product

and to create value for the modern Filipina women. Such awareness efforts would

project the features and benefits of Havaianas Aqua that would lead to its role as a

necessity given various environmental conditions – sandy, wet, rocky etc. Having

said that, it also follows Havaianas Flip Flops’ promotion strategy of showcasing

itself as a casual footwear for any occasion.

Havaianas Aqua would be largely promoted through artistic print ads strategically

placed in locations frequented by its target market. There would clearly be no

promotion initiated by Havaianas Aqua itself through television and radio

advertisements. Much like Havaianas Flip Flops, it would sponsor or partner with

events that are generally related to the image Havaianas Aqua seeks to exude.

Lastly, Havaianas Aqua would take advantage of Havaianas Flip Flops existing

means of promotion such as their website, facebook account, stores, implicit

celebrity endorsements and havaianas’ cult following, the “Havies” or

“Havianaticos”. Moreover, this would be deemed effective since the survey study

shows that most people know of aqua shoes through print ads and word of mouth.

b. Advertising

Print Advertisements

Following how Havaianas Flip Flops started promoting its product line, Havaianas

Aqua would also focus more on advertising through print ads. Such print ads would

either feature artistically designed and colorful layouts of its aqua shoes or photos

of models or awareness-related concepts. Print ads showcasing colorful layouts

would help associate Havaianas’ aqua shoes line to Havaianas’ image as a colorful

and fun brand. In this way, Havaianas’ aqua proves itself to be go-to for fun,

fashionable and colorful designs. Print ads showcasing photos of models aim to

identify the lifestyles of Havaianas Aqua’s target market. Print ads showcasing

awareness-related concepts would be presented through quirky antics

demonstrating just why Havaianas Aqua is a must have. Some of these could

imbibe a sense of fear to relate to the primary benefits that aqua shoes or

Havaianas Aqua would bring. These print ads would be in the form of posters,

tarpaulins, magazine advertisements, billboards and wall designs. Magazines where

Havaianas Aqua ads would be placed will be Mega, Preview, Cosmopolitan and

Preview.

Word of Mouth/ Bandwagon

Through loyal consumers of the existing Havaianas Flip Flops, Havaianas

Aqua hopes to depend on the word of these “Havianaticos”. Given that they already

have an online community for Havaianas and a Havaianas Mailing List, Havaianas

Aqua would use these systems to disperse information and other promotion.

Moreover, Havaianas Aqua would hold gatherings or events especially for this fan

base so as to assume them the role of opinion leaders for the new product line.

They would also be constantly updated regarding the product line. Havaianas

Aqua will not have any official celebrity endorser. Rather, it would count on

celebrities’ participation in events or product launchings as an implicit product

endorsement itself. It would also rely on being casually mentioned/worn by

celebrities. Havaianas Aqua would then bank on spreading how it was used by these

personalities through other forms of media like fashion blogs, the Havaianas

Facebook account, and magazines.

Source: Make Your Own Havaianas 2009, Havaianas Philippines Facebook

Account

Bianca Gonzales, TV personality, at the MYOH 2009

Source: Make Your Own Havaianas 2009, Havaianas Philippines Facebook

Account

Infomercials

In the events to come, Havaianas Aqua would provide infomercials regarding

the benefits of aqua shoes. In this way, the public would be familiarized with the

existence, usage, and value of aqua shoes. Consequently, it would also capitalize on

Havaianas Aqua as the pioneering brand for aqua shoes by showing its edge as a

youthful, fashionable, and popular brand.

Infomercials would also be shown inside select Havaianas stores.

Website

As the internet is the most accessible and reliable source to Havaianas

Aqua’s target market, Havaianas Aqua would also have its own part in the

Havaianas’ website. Aside from the general information it would give regarding

aqua shoes and Havaianas Aqua as a new product line, it would also include the

line’s different designs. Furthermore, the website would allow its visitors to look

over designs in a 3D way. They would have the advantage of being able to go over

the designs at different angles by simply hovering the mouse pointer over them.

c. Consumer and Trade Activities

Havaianas Aqua ads will be placed in strategic locations catering to its target

market. Promo materials would be placed inside malls where Havaianas stores and

authorized resellers are located. In some activity centers, Havaianas Aqua would

have exhibits or programs presenting the different designs of its product line.

Furthermore, ads could be placed inside Rustan’s department stores.

Since the location of the Havaianas flagship store is also the area for Havaianas

Aqua’s target market, it is sure to have even greater promotion in Bonifacio High

Street. By greater, it would be by means of having sculptures and wall designs of

Havaianas Aqua along that area.

d. Merchandising/ Point of Purchase Materials

In all the Havaianas’ existing stores, Havaianas Aqua would have attractive window

displays. These window displays would highlight Havaianas Aqua as an emerging

beach casual footwear staple. Since Havaianas retailers are different types of

stores, ranging from exclusive Havaianas retail outlets, to shoes and clothing stores,

department stores, sports shops and even spas, hotels and resorts, they would be

offered with different proposals as to how their Havaianas Aqua displays would look

like.

As for other authorized resellers, Havaianas Aqua would also have attractive

window displays depending on its deal with the reseller. Havaianas stores and

authorized resellers would have a special wall/shelf dedicated to Havaianas Aqua.

The design of the wall would vary depending on the season. Since Havaianas Aqua

are not just expected to be used for the beach, the wall designs would depict

varying setting concepts. For example, the wall design could be a beach setting for

the summer season while for the rainy. Along with these would be quirky little trivia

notes pushing the need for Havaianas Aqua. An example of a trivia note would be

as follows.

- DIP IN. SLIP IN. NEOPRENE!

- It’s not the heat of the sun. It’s the heat of the sand! Walk, walk, burn!

Neoprene won’t take any of that! Your lovely footsies should have the best

tender love and caring it deserves! Neoprene provides great protection

against the cold and the heat! Whether it’s the chilly breeze or the scorching

heat, neoprene assures just the needed insulation for your feet!

- Havaianas Aqua is made with this neoprene to ensure your feet just won’t

stand out from the crowd. They’d also stand the heat, rain, wind and many

more!

- Shake it. Move it. Anywhere you want it!

- Walk. Run. Skip. Hop. Jump. Gallop. Dance. If only you really could at the

beach, right? Alas, going bare or flip flops aren’t enough. Rocks, pebbles, sea

urchins, crustaceans and the list goes on! They’re just all out to get our feet!

- Protect and Conquer!

- You thought you could totally protect your feet by slipping on some rubber

shoes? Wrong move! The sand just won’t let you. A little here. A little there.

Sand just keeps getting in your shoes! And in your nerves!

For the small boutiques and shops with very limited space, this barrel-like rack may

be used. It stands alone and may be placed beside the flip flops rack.

In Rustan’s department stores, Havaianas Aqua would have its own “center island”

that would be similar to the window displays found in Havaianas stores as

mentioned.

Figure 3.4.1 Window Display

4 feet

6 feet &

8 inches4 feet

1 foot

e. Publicity/ PR/ Events

As for Havaianas Aqua’s promotional events/ activites, it would sponsor school

events specifically universities. Such universities would be those where Havaianas

Aqua’s target market would be in. Opportunities in being involved in school events

would be getting exposure to this demographic and establishing itself as a youthful

product line.

Aside from that, Havaianas Aqua would hold its own fashion show and also partner

with other designers/ brands that have the same target market to be in their fashion

shows. Such efforts would be essential in assuring that Havaianas Aqua is a

fashionable choice. It would show that it would actually complement different

clothes and styles. Moreover, partnering with different designers/brands also help in

enhancing the image it’s creating to its target market given that these partner

designers/brands also uphold the same advocacy. This advocacy would be geared

to the modern, fun, and fearless Filipinas however diverse their lifestyles may be.

These fashion shows would not necessarily be confined to the beach. It could also

be anywhere within the metro like the Rockwell Tent.

Havaianas Aqua would also have product launchings through sponsorships in beach

parties/events and water sports events or competitions. Such beach parties/ events

would be those organized by television networks specifically ETC, Studio 23 and

MTV. The mentioned television networks are known for hosting parties that offer

wide media coverage. Moreover, they are sure to bring in the target market for

Havaianas Aqua.

Also, Havaianas Aqua would hold its own launching beach party to bring focus to

this new product line. This event expects to invite lots of celebrities from different

industries to the event. Moreover, it would emphasize on the theme of fun and

sporty Filipina empowerment.

Source: Camsur Watersports Complex Official Website

Source: MTV Philippines, MTV Summer Break with Coca Cola Event

IX. 3-Year Financial Forecasts

1. 3-year Sales Projections (volume/sale)

YEAR 1 YEAR 2 YEAR 3

SALES VOLUME 472,474 pairs 481,072 pairs 489,824 pairs

MEDIAN PRICE Php 1,849 Php 1,849 Php 1,849

SALES VALUE 873,602,650.96 889,501,813.30 905,682,855.69

The sales volume was computed by multiplying the percent of those willing to

buy our product which is 60.98% and the target market size. The sales value was

computed by multiplying the computed sales value and the products’ median price.

2. Detailed Marketing Budget and Marketing Timetable

MARKETING CHANNEL

YEAR 1 YEAR 2 YEAR 3

PRINT ADS 3,000,000 2,500,000 4,000,000

BILLBOARDS 2,500,000 2,000,000 3,000,000

WEBSITE AND ONLINE PROMOTIONS

1,720,000 1,720,000 1,720,000

EVENT PROMOTIONS

6,000,0000 3,000,000 6,500,000

OTHER PROMOTIONAL ACTIVITIES

1,500,000 1,300,000 1,600,000

TOTALBUDGET 14,720,000 8,720,000 17,220,000

3. 3-year Media Schedule

Year 1

Marketing Activity JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Print

Online & Internet

Billboards

In-store Promo

Year 2

Marketing Activity JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Print (Mags, Tarps Posters)

Online & Internet

Billboards

In-store Promo

Year 3

Marketing Activity JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Print

Online & Internet

Billboards

In-store Promo

To start Havaianas Aqua’s first year, it will have its own launching

beach party. Other event promotions will still depend on potential clients,

sponsorships and upcoming events. All marketing activities will be ongoing

the whole year round till its third year since Havaianas Aqua is still building

on consumer awareness of its product line. The promotions will be

heightened during summer vacations and rainy seasons to further promote

the function of the product.

In Havaianas Aqua’s first year, it is expected that consumers would

have a clear idea of aqua shoes and the market position of Havaianas Aqua.

It is geared towards creating knowledge and demand of its product line. Still,

for the first year, the focus would be in Metro Manila. In its second and third

year, it is anticipated that there would be possible competitors that would

follow or challenge what Havaianas Aqua. Havaianas Aqua then needs to be

consistent in its marketing activities so as to defend its position and market

share. Also, Havaianas Aqua aims to strengthen advertising beyond Metro

Manila such as those authorized resellers. This would most probably be in

highly urbanized areas such as Cebu and Davao.

4. 3-year Pro-forma Income Statements

YEAR 1 YEAR 2 YEAR 3

SALES 873,602,650.96 889,501,813.30 905,682,855.69

COST OF SALES 518,147,008.78 527,577,043.59 537,174,265.74

GROSS PROFIT 355,455,642.18 361,924,769.71 368,508,589.95

OPERATING EXPENSES

124,048,629.10 136,453,492.01 150,098,841.211

ADVERTISING EXPENSES

9,720,000 3,720,000 12,220,000

NET INCOME 221,687,013.08 221,751,277.70 206,189,748.74

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