International Business Strategy
The not so UGGly Truth
A Case Study of UGG Australia
I - UGG Australia’s success pillars
1 - Evidence of their success: their financial position
2 - The marketing strategy: the four P’s
3 - International Business Strategy
3.1 Incremental internationalization
3.2 Psychic Distance
II - Dual Strategy towards brand sustainability
1 - Market Penetration
2 - Product Development
III - Conclusion
IV - Bibliography
V - Appendices
Since its acquisition by Deckers in 1995, UGG Holdings Inc. has grown from a local Australian brand favoured by surfers to a global luxury brand name. This growth has been spurred by one product in particular; the UGG boot. These boots came into fashion and saw their sales rise from US$ 37 million in 2003 to US$ 567 million in 2009 (Annual Report, 2009). Despite marketing products that are subject to fast changing trends and fashion, UGG Australia has shown stable growth over the last decade. Nevertheless, the ever-changing nature of the fashion market has proven problematic for other shoe brands, such as Crocs. In 2009, these trendy colourful slippers fell out of fashion and the company lost US$ 185.1 million dollars. (Mui, 2009) At first glimpse, it seems that UGG Australia has circumvented these fashion market pitfalls with their product, however, the question remains then, what it is that sets UGG Australia apart from other luxury fashion brands.
This paper aims to answer to the question whether UGG Australia has succeeded in turning a ‘passing fad’ into an established brand. This paper consists of two parts; The first part of the paper analyzes the foundation of UGG Australia’s brand image: the marketing strategy and the international business strategy. The second part of this report will analyze the optimal strategy for UGG Australia to ensure brand sustainability.
I - UGG Australia’s Pillars for Success
1. Evidence of UGG’s Success: The Financial Position
As can be seen in the financial overview in table 1, UGG Australia has seen its gross sales rise from US$ 483,781 million in 2008 to US$ 566,964 in 2009, which is a 17.19 percent increase. According to Decker’s Annual report, 2009 was the 12th consecutive year in which UGG achieved a double-digit growth (Annual Report, 2009). This is a rather remarkable growth, considering the fact that both years have been characterized by poor economic conditions.
| |2003 | |C |D | |MARKET DEVELOPMENT |DIVERSIFICATION |
Through market penetration, Deckers acquires high market share of its existing markets with its existing product lines. This strategy is framed around the existing strategic capabilities of the company.
This strategy is also adopted by the company by delivering new or adjusted products to its existing markets. This strategy implies a high amount of innovation through heavy investment.
The company distributes the existing products to new markets.
Value creating reasons for diversification are the following:
• Efficiency gains
• Stretching corporate parenting capabilities
• Increased market power
International strategy framework
The international strategy adopted by the company has shaped the choice of country markets and especially the modes of market entry.
Focused Differentiation Strategy
Seeks to procure high perceived product advantages justifying a considerable price premium targeted to selected market segments -niche.
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