512 ENTREPRENEURSHIP CASE
address the radically changed demands of the
marketplace.PA RT BIn a quickly changing market, Rick Wang
and his Athlete’s Foot stores encountered a
series of problems that threatened his compa-
ny. Increased competition, in what had
heretofore been an “open” market, forced
Wang to work out a number of strategies so
that his franchise plans could survive. After
evaluating and implementing a number of
strategies, Wang made a difficult decision.
The available options and Rick Wang’s actu-
al decisions are discussed in the following
case study.A STRUGGLE FOR SURVIVALAfter being squeezed out of department
stores by his competitors, Wang had to relo-
cate his business to “the street” or to less-
desirable, lower-traffic shopping malls in
order to adhere to a certain economy of scale.
However, the consequences of his decision to
relocate led to higher rents and lower sales.
Wang was forced into a string of strategic
decisions, all related to stricter competition
from better-positioned competitors. In fact,
Wang faced a retailer’s worst nightmare:
higher costs and lower profits. Worse still,the more stores he had, the worse his bottom
line fared. This, despite the fact that rapid
franchise growth had been his key strategy
before competitors emerged in his market.
Ultimately, Wang had to close stores to pre-
serve the financial balance of his over-extend-
ed empire.
When Wang looked for alternative retail-
ing methods, ones which would complement
his established but faltering on-site retailing
outlets, he opted for e-commerce. He won-
dered if selling shoes in a virtual store would
lead to increased profits and act as a magnet
for his brick-and-mortar operations. He
“opened” an online shoe booth aimed at
reclaiming and increasing consumers’ brand-
loyalty to his product.
Unfortunately, the online booth did not
succeed in attracting customers. E-com-
merce, at that time, was in its infancy in
China, though it was booming in most
Western countries. Limited by uncertain
internet access and restrained by a lack of
credit, consumers in this section of the
Chinese market were not (yet) comfortable
with internet retailing. Additionally, Chinese
consumers were culturally attuned to the
physical act of “trying and buying.” And,
since Wang’s products were quite expensive
when compared to local athletic shoes, he
also had to overcome a cultural distaste for
purchasing items by virtue of appearance
alone. Even major international suppliers of
competitors’ footwear brands had rejected
online marketing, so Wang’s choice—
although a forward-looking one—was not
something that more experienced retailers
had found useful.
In athletic footwear retailing, having the
most fashionable and trendy supply is essen-
tial. Wang turned to his franchisor, The
Athlete’s Foot Inc., to help him with local
supply-chain problems. He assumed that his
franchisor, with its 30-year history of interna-
tional experience (including stores in over 40
countries) would help him to overcome his
lack of leverage over reluctant suppliers. He
assumed incorrectly.
The franchisor was simply not as well-Source:Professor Ilan Alon and Amber Xu wrote Part
B of this case solely to provide material for class discus-
sion. The authors do not intend to illustrate either effec-
tive or ineffective handling of a managerial situation.
The authors may have disguised certain names and other
identifying information to protect confidentiality.
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