THE EVOLUTION OF CROCS, INC.:
WILL CROCS FACE EXTINCTION?
Scott Droege, Western Kentucky University
Lily C. Dong, University of Alaska-Fairbanks
The primary subject matter of this case concerns the four “Ps” of marketing—product, price, place, and promotion. Secondary issues examined include entrepreneurship and business strategy. The case has a difficulty level three, appropriate for junior level courses. The case is designed to be taught in one class hour and is expected to require one hour of outside preparation by students. CASE SYNOPSIS
Crocs, Inc. was founded in 2002 by three avid boaters who began a small company to make shoes specifically designed for boating. The owners were surprised by their own success; Crocs rapidly moved from a boating shoe to a fashion statement. After taking the company public in 2006, Crocs has come under increasing shareholder pressure to diversify. The fear was that Crocs limited product line was a “one trick pony” and as soon as consumer fashion tastes changed, Crocs sales would quickly decline. Crocs has responded to this pressure by moving beyond shoes to increase the variety of its product line, but in doing so the firm has encountered entrenched competitors that have fought back against Crocs’ market encroachment. Management is well aware that competition and shifting consumer tastes could make Crocs extinct. These threats will drive Crocs to further hone its product, place, pricing, and promotion decisions. Exactly how Crocs will manage this, however, remains to be seen.
BACKGROUND: THE BIRTH OF CROCS
The birth of Crocs began in May of 2002, when three friends from Boulder, Colorado went sailing in the Caribbean. This was a rather unremarkable event in itself. However, soon their names, Lyndon "Duke" Hanson, Scott Seamans, and George Boedecker, would become well-known in the footwear industry.
The thing that made this sailing trip stand out lay in the hands of one of the friends, or rather on his feet. Scott Seamans had purchased a pair of foam clogs in Canada. Impressed by their Journal of the International Academy for Case Studies, Volume 15, Number 3, 2009
performance while boating, the three friends began visualizing the perfect boating shoe. They envisioned shoes that were comfortable, functional, and durable. This led them to the idea of Crocs. Crocs are made from proprietary closed-cell resin material, which the company often refers to as croslite, that feels nearly weightless. In fact, a pair of the largest size of Crocs available weighs less than six ounces. The closed-cell resin softens with body heat and molds to the shape of the foot. Also, because the material is closed cell, it's anti-microbial so it virtually eliminates odor. To add to their functionality, the soles are non-marking and slip resistant and don’t hold mud or debris and the ventilated toe box is designed so that air, water, or sand can filter through the shoes. Crocs are extremely easy to maintain and can be sterilized, bleached, or washed in a washing machine. They are also ideal when it comes to comfort standards, with features like built-in arch support, orthopedic heel cups, circulation stimulation nubs on the insoles, and supportive orthopedic molded soles. Although Crocs has been able to patent the basic design, problems remained. The weakness of the patent is such that competitors can easily copy the basic elements of Crocs’ products with only minor modification. Nevertheless, Crocs believed its niche market would value the “original” and would hesitate to switch to competitors. Early, on, this was a correct assumption until Crocs gained momentum. As the market niche was developed, however, Crocs had the market to itself. One reason is not so much related to the relative weakness of its patents, but to the idea that competitors viewed Crocs as ugly shoes that would not appeal to a broad customer base. This bought time for Crocs to establish a foothold....