From first half sales of $274 million and profits of $45 million in 2006, the company's sales and profits dropped to $225 million and $26 million in the same period in 2007. This case reviews the company's performance, analyzes the potential reasons for the large drop in sales and profits after forty years, and suggests changes in corporate strategies. K-Swiss primarily designs, develops, and markets athletic footwear for sports use, fitness activities, and casual wear under the brand names K-Swiss and Royal Elastics. It also markets apparel and accessories under the K-Swiss brand: tennis apparel such as skirts, shorts, tops, polos, dresses, and warm-ups for men and women, as well as tee shirts, caps, socks, and bags for casual athletic consumers. Products are sold through sales executives, independent sales representatives, and its website www.kswiss.com to specialty athletic footwear stores, pro shops, sporting good stores, and department stores here and overseas.
Arthur and Ernest Brunner were avid skiers and tennis players who moved from Switzerland to California in 1966 to start a business venture selling shoes. In the typical fashion of craftsmanship for which the Swiss are known worldwide, they designed a shoe that responded to and supported the specific needs of tennis players by focusing particularly on cushioning for the soles of the feet, as well as the construction of a firm upper that would not easily give way to the pressure of forceful lateral movement (Schlax 7).
Marketing, Design and Pricing Strategies
They called their shoe "The Classic", introducing the product at Wimbledon in 1966 where it met with great success. The design of the shoe was intended for intense use, but its appearance was simple, austere, and elegant: three sturdy leather pieces constituted the shoe's upper, which was held in place by five narrow leather strips. The sole was a thin but strong strip of lightly treaded rubber that allowed it to be light and relatively frictionless. Aside from a small Swiss flag on the heel of the shoe, the K-"Classic" was entirely white in color, giving the shoe a timeless, preppy appearance. Each piece was numbered, the label was hand-sewn into the shoe's inner lining, and each pair sold for $20 when the most expensive tennis shoe at the time sold for only $7.50.
Tennis players and upscale consumers took to the shoe immediately, and soon K-Swiss was enjoying a small but growing popularity in the U.S. as a fashion statement: simple, elegant, sturdy, and expensive. It was not only used for tennis and walking, but for daily casual wear, its white color allowing it to be used by men and women with any fashion combination (Taub 9).
Its West Coast location attracted a great number of Japanese residents and tourists, and by the early 1970s, K-Swiss gained an almost cult-like status in Japan, moving the company to open dozens of accounts in that country. When the company's U.S. market exploded, the company began manufacturing the shoes in Southeast Asia, where labor costs were lower,