ASSIGNMENT 2 FRONT SHEET
Qualification
BTEC Level 5 HND Diploma in Business
Unit number and title
Unit 25: Global Business Environment (5076)
Submission date
25/08/2023
Date received (1st submission)
Date received (2nd submission)
Re-submission date
Student name
Nguyen Khanh Phong
Student ID
GBD210043
Class
GBD1004
Assessor name
Nguyen Huu Nam Phuc
Student declaration
I certify that the assignment submission is entirely my own work and I fully understand the consequences of plagiarism. I
understand that making a false declaration is a form of malpractice.
Student’s signature:
Grading grid
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TABLE OF CONTENTS
LIST OF FIGURES ........................................................................................................................................................... 4
LIST OF TABLES ............................................................................................................................................................. 4
I.
Company introduction ......................................................................................................................................... 5
II.
Impact of Globalization on the organization....................................................................................................... 5
1.
2.
3.
McKinsey’s model and Foot Locker ................................................................................................................. 5
1.1.
Theory of McKinsey’s 7s model ............................................................................................................... 5
1.2.
Examination of Foot Locker based on McKinsey’s 7s model .................................................................. 6
1.3.
Evaluation of the impact of globalization elements on the organization .............................................. 8
Ethical and sustainable globalization ............................................................................................................ 12
2.1.
Social issues: Child Laboring in the suppliers of Foot Locker ................................................................ 12
2.2.
Social issue: Poor working condition in Foot Locker’s suppliers .......................................................... 12
Global strategic options ................................................................................................................................. 13
3.1.
SWOT analysis ........................................................................................................................................ 13
3.2.
Production Strategy ............................................................................................................................... 14
3.2.1.
Export.................................................................................................................................................. 14
3.2.2.
Licensed outsourcing .......................................................................................................................... 15
3.2.3.
Offshoring product ............................................................................................................................. 15
3.2.4.
Recommendation for Foot Locker on implementing product strategy............................................ 16
3.3.
3.3.1.
Licensing ............................................................................................................................................. 16
3.3.2.
Company-owned stores ..................................................................................................................... 16
3.3.3.
E-commerce ........................................................................................................................................ 17
3.3.4.
Recommendation for Foot Locker on retail strategy in Vietnam ..................................................... 17
3.4.
III.
Retail strategy ........................................................................................................................................ 16
Global integration versus Local responsiveness ................................................................................... 17
3.4.1.
Global integration: Suppliers issue .................................................................................................... 17
3.4.2.
Local responsiveness .......................................................................................................................... 18
Conclusion ...................................................................................................................................................... 18
REFERENCES................................................................................................................................................................ 19
3
LIST OF FIGURES
Figure 1: Foot Locker Inc. ............................................................................................................................... 5
Figure 2 Country comparison by Hofstede Insights ..................................................................................... 10
LIST OF TABLES
No table of figures entries found.
4
I.
Company introduction
Figure 1: Foot Locker Inc.
Foot Locker, a global retailing behemoth in the athletic footwear and clothing sector, has established
itself as a must-visit destination for sneakerheads and sports aficionados alike. Foot Locker's
tradition spans several decades and has become synonymous with top-tier products, unrivaled
customer service, and an unrivaled love for all things athletic. Foot Locker, Inc. is a prominent
footwear and clothing shop dedicated to bringing out the "inner sneakerhead" in all of us. Foot
Locker, Inc. has a strong history of sneaker authority that sparks discovery and ignites the power of
sneaker culture through its portfolio of brands, including Foot Locker, Kids Foot Locker, Champs
Sports, WSS, and atmos, with approximately 2,600 retail stores in 26 countries across North America,
Europe, Asia, Australia, and New Zealand, and a franchised store presence in the Middle East and
Asia.
II.
Impact of Globalization on the organization
1. McKinsey’s model and Foot Locker
1.1.
Theory of McKinsey’s 7s model
The McKinsey 7S Model was created in the beginning of the 1980s by Tom Peters and Robert
Waterman, two consultants at McKinsey& Company, and has subsequently been used to evaluate
over 70 big firms. The model was designed to be a recognized and readily remembered business
paradigm. The seven factors, dubbed "levers" by the authors, all begin with the initial "S":
“structure", "strategy", "systems", "skills", "style", "staff", and "shared values/superordinate
goals".
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1.2.
•
Examination of Foot Locker based on McKinsey’s 7s model
Strategy
The strategic direction and the overall business strategy for Foot Locker Inc are clearly defined and
communicated to all the employees and stakeholders. This helps the organization manage
performance, guide actions, and devise different tactics that are aligned with the business strategy.
In accordance with the business plan, SMART Goals are established with short and long-term
deadlines. The company strategy assists employees in deciding methods and behaviors to help the
firm expand by achieving the established goals and targets. With its flexibility and adaptability, Foot
Locker Inc not only benefits from fast reacting and responding to changing consumer habits
throughout the world, but it is also able to regionally and culturally adjust its products through
localization for diverse nations and areas (Harvey, 2020).
•
Structure
Foot Locker Inc has a lower organizational hierarchy that is supported by progressive and learning
organizations. Employees feel more comfortable and confident, and have more availability of
information, with fewer administrative layers in between and more access to top management and
leadership. In an effort to improve its agility, speed and overall consumer experience, Foot Locker
Inc. announced today a new organizational structure that includes multiple senior management
promotions (Harvey, 2020).
As for its new organizational structure, Foot Locker said the changes will include a better connection
of its customer-facing functions wherever it operates to improve focus on customer experience
engagement; the strengthening of its community connectivity that will help create localized
customer experiences, product offerings and community activations; and the streamlining of its
operational and expense structure for productivity and flexibility internally (Harvey, 2020).
•
System
Foot Locker Inc has defined and well-demarcated systems in place to ensure that the business
operations are managed effectively and that there are no conflicts or disputes. The systems at Foot
Locker Inc are largely departmental in nature, and include, for example: Human resource
management, Finance Marketing, Operations, Sales and Supply chain management. The developed
controls are used to continuously assess its systems. This performance monitoring is continuous and
ongoing. This is mostly accomplished through observation and casual talks. Employees and
department leaders receive informal feedback on a regular basis, as needed. Formal performance
evaluations are also done semi-annually or quarterly, depending on the necessity and urgency of the
projects and given duties. This is a structured method used by supervisors and management to
identify performance gaps and propose measures for improvement (Harvey, 2020).
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•
Shared Values
Foot Locker Inc's fundamental values are developed and conveyed in order to build a creative and
supportive organizational structure that will help workers to perform effectively while also
increasing their motivation and organizational commitment. Foot Locker Inc's core values
include: INTEGRITY: act honestly, ethically, and honorably, LEADERSHIP: respect, inspire, develop,
and empower, EXCELLENCE: strive to be the best in everything we do, SERVICE: satisfy our customers
every time, TEAM WORK: collaborate, trust, support, commit, INNOVATION: be a student of the
business to initiate and foster new ideas, and COMMUNITY: embrace diversity; act responsibly for
our customers, associates, investors, and communities (Foot Locker Inc., 2017)
•
Styles
In Foot Locker, the leadership’s role is to empower every employee in the organization in order to
reaching goals. Foot Locker Inc utilizes a participatory leadership style to involve workers in decisionmaking processes and managerial choices. This approach enables regular communication with
employees and various managerial groups, detecting potential problems and commenting on
strategic strategies. This approach improves employee engagement and promotes organizational
commitment and ownership among workers and stakeholders (Harvey, 2020).
•
Staff
Foot Locker Inc employs a significant number of people. The number of workers varies each nation
based on the demands and requirements of the business and activities. Foot Locker Inc's worldwide
team is inclusive, accepting and encouraging diversity, and working in partnership with members to
achieve corporate objectives. The most crucial aspect of Foot Locker Inc's company performance is
its team members and workers (Harvey, 2020).
•
Skills
Foot Locker Inc employs its employees for various job types and positions based on urgency and skill
levels. The company's human resource department coordinates divisions to detect potential
vacancies or skill gaps. They provide permanent or contractual recruitments and training sessions
for current staff, depending on the requirement. The company's human resource function ensures
proficiency in their job duties and positions (Harvey, 2020).
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1.3.
•
Evaluation of the impact of globalization elements on the organization
Vertical organizational structure:
Foot Locker needs to alter its organizational structure in order to completely adapt and prepare for
globalization. It is appropriate for it to transform the structure from centralized to decentralized.
Employees can be empowered by having greater authority to make their own decisions when
switching to a decentralized structure, giving them a sense of significance and making them feel as
if they have more involvement in the future of the firm. It also helps them to put their expertise and
experience to greater use and execute some of their own ideas (Joseph, 2019). Decentralization also
helps a developing firm with its expansion process. For example, if expansion necessitates the
establishment of another company division in a different region, decentralization enables the newly
created division to function as an independent entity, allowing it to respond more quickly to the
specific needs of the area, such as deciding to sell products that appeal to the local market (Joseph,
2019).
•
Horizontal organizational structure:
In order to achieve globalization, Foot Locker should expand its scale to other regions in the world.
It means that their organizational structure should also follow the regional structure. Firstly, it will
increase the insights of the local customers. Building close relationships with local consumers allows
firms to better understand their requirements, preferences, and concerns. As a result, the marketing
message is more appealing to local customers, allowing for a successful marketing approach
(Nasrudin, 2022). Open communication allows for the fast settlement of issues and complaints,
resulting in a seamless and efficient customer experience. Furthermore, strong collaborative teams
at each region are essential for any organization's success. They can collaborate more effectively
when they have no barriers created by issues such as language and cultural obstacles. Such teams
will generate a sense of solidarity and mutual support, resulting in a great work atmosphere in which
individuals flourish and are inspired to give their all (Nasrudin, 2022).
•
Leadership
Foot Locker, Inc., the New York-based specialty athletic retailer, today announced it has entered
into a definitive agreement to buy Text Trading Company, K.K., which owns and licenses the “atmos”
brand, a digitally led, premium, global retailer headquartered in Japan, for $360 million. The
transaction will be funded with the Company’s available cash. Richard A. Johnson, Chairman and
Chief Executive Officer of Foot Locker, Inc. said, “atmos is uniquely positioned through its innovative
retail stores, high digital penetration, and distinctive products that have made it a key influencer of
youth and sneaker culture. With atmos, we are executing against our expansion initiative in the
rapidly growing Asia-Pacific market” (Foot Locker, Inc., 2021).
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Foot Locker has ambitious strategies to increase its market presence in Asia, identifying potential
prospects in the region's expanding middle class and sufficient income. The company intends to build
solid foundations and achieve long-term success by tapping into fast-growing nations such as China,
Japan, and Vietnam. This innovative decision reflects Foot Locker's dedication to staying ahead of
the competition and adapting to the ever-changing global business landscape. It intends to stay
ahead of rivals and benefit on the region's rising consumer base by extending its customer base,
enhancing brand awareness, and driving revenue growth.
• Corporate Governance
In the globalization context, the supplier issues is one of the most important concerns that Foot
Locker should take consideration. Adopting responsible supply chain practices such as implement
rigorous standards across the supply chain, including ensuring fair labor practices, ethical sourcing,
and environmental sustainability. There are regulations of supplier ethic that are declared by Foot
Locker in the statement “Global Sourcing Guidelines”, apply worldwide to Foot Locker’s suppliers.
These principles compel all of Foot Locker's suppliers to adhere to specific employment standards
that Foot Locker thinks are universal such as Anti-corruption, child or forced laboring, working
conditions and employee safety, regardless of any more relaxed requirements imposed by applicable
local laws (Foot Locker, Inc., 2022).
The Governance Board of Foot Locker should make every effort to spot their current trustworthy
suppliers that are dedicated to ethical business practices and know that empowered workplaces are
productive, profitable, and successful. In order to gain the status of its suppliers, the Governance
board of Foot Locker must develop a suppliers supervision council and educate an administration of
qualified and ethical personnels. Personnels who are recruited in the council have to go through a
detailed onboarding program. The program requires the candidates’ analytical skills, critical thinking,
negotiation skills, and their work ethic. After the establishment, this council will perform field
monitoring at the company's suppliers, including their production, packing, and shipping facilities,
utilizing the Global Sourcing Guidelines as a reference system. At every financial report in each
quarter, the supervisors will conduct a consolidated report on the suppliers’ compliance of the
guidelines. From the report, the company governance will take actions to the suppliers’ compliance
status collected by the field supervisors.
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•
Cultural differences
Figure 2 Country comparison by Hofstede Insights
(Source:https://www.hofstede-insights.com/country-comparison-tool?countries=united+states%2Cvietnam)
Power distance: Looking in the comparison chart, there is a significant difference of the beliefs in
power distance in Vietnam and U.S people. Vietnam scores 70 in power distance. In Vietnamese
culture, people accept a hierarchical order in which everyone has a place and respects assigned
positions. Also, this society does not encourage challenges to established leadership. On the other
hand, the United States scores low on this dimension. It has an index is 40 and is considered a low
power-distance society. In American culture, hierarchy is established for convenience, and
communication is informal, direct and participative (Nguyen, 2014).
Individualism: In Hofstede’s individualism index, the United States ranks higher with an
individualism index of 91. The U.S. is considered a highly individualistic culture in which people are
accustomed to interacting with strangers, and willing to approach their respective counterparts in
order to obtain or seek information. On the contrary, Vietnam has a very low index, 71 points lower
than the U.S. With a score of 20, Vietnam is a collectivist society. In a collectivist culture, loyalty is
supreme and supersedes most other societal laws and regulations. This culture fosters strong
relationships in which everyone takes responsibility for their group members. As a result, offense
results in shame and loss of face. As a result, Vietnamese culture is regarded as a "shame" culture
associated with a collectivist society. The United States is seen as a very independent society in which
individuals feel comfortable engaging with strangers and are eager to approach their counterparts
in order to receive or seek information (Nguyen, 2014).
Masculinity: In Hofstede’s masculinity comparison, the masculinity index of the United States is 62,
compared to 40 for Vietnam. Vietnam, on the other hand, is considered a feminine society in which
people value equality, solidarity and quality in their working lives. This measurement indicates that
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American culture is classified as a masculine society in which people's behaviors are founded on
common ideals that they should strive for with all their might. American society also encourages
openly expressing and discussing one's life victories and achievements. The emphasis is on wellbeing, as it is in Vietnam, a feminine country. Flexibility and free time are also valued. Both parents
are equally concerned about the quality of life and relationships in this feminine culture (Nguyen,
2014).
Long-term Orientation: In Hofstede’s comparison, the U.S scores 28, a significantly low index.
Americans are exceedingly practical, as seen by their mentioned "can-do" attitude. Their companies
measure their success in the short term, with profit and loss accounts produced quarterly. This also
motivates employees to strive for speedy outcomes at work. On the contrary, Vietnam scores 57 on
long-term orientation, a middle number. It indicates that Vietnam has a long-term focused culture.
Truth is seen to be extremely situational and time-dependent in long-term oriented civilizations.
They have a high proclivity to save and invest, as well as the capacity to readily adjust traditions to
new realities. thriftiness and tenacity to obtain achievements (Liang, 2022).
Indulgence: With a score of 68, the United States is an indulgent culture. Employees in an indulgent
culture such as the United States are inclined to prioritize both personal and professional
achievement equally. Americans are continually looking for ways to reward themselves for their hard
work, which reflects the common saying "work hard, play hard." To foster a healthy work
atmosphere, many American corporations establish various interest clubs or sports teams.
Employees in the United States strive for recognition and compensation for their efforts. Vietnam,
with a score of 35, belong to the more restrained countries in the world. There are strong social
norms keeping them from expressing their desires and impulses. They usually have more work ethic
than leisure ethic. Most Vietnamese people believe that their behaviors are limited by societal norms
and that indulging themselves is not suitable (Nguyen, 2014).
•
Potential cultural barriers:
When operating in Vietnam, Foot Locker has to adapt to the hierarchy of power distribution in the
local market. This means that the company needs to understand and respect the cultural norms and
values that shape the way power is distributed and respected in Vietnamese society. In Vietnam,
there is a strong emphasis on hierarchy and authority, with power being concentrated in the hands
of a select few. As a result, Foot Locker needs to establish relationships with key stakeholders and
decision-makers in order to navigate the complex power structures in the local market. This may
involve building partnerships with local business leaders, government officials, or other influential
individuals. By understanding and adapting to the hierarchy of power distribution in Vietnam, Foot
Locker can effectively operate in the local market and establish itself as a trusted and respected
brand.
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2.
Ethical and sustainable globalization
2.1.
Social issues: Child Laboring in the suppliers of Foot Locker
One of the main social issues of Footlocker is that their product suppliers used to be in watchlist of
child labor in China. Between 2017 and 2019, ASPI estimates the Chinese government relocated at
least 80,000 Uyghurs from Xinjiang in western China to factories across the country where they work
“under conditions that strongly suggest forced labor.” What’s more, it says the manufacturers using
these transported Uyghurs supply at least 83 international companies making everything from
footwear to electronics (Bain, 2020). The Taekwang plant in South Korea is one of Nike's top suppliers
for Foot Locker, manufacturing 8 million pairs of Nike footwear each year, including hallmark brands
like Air Max and Shox. It collaborated with Chinese government-run forced labor programs
implicated in crimes against humanity. This controversy of Taking steps into the global market, Foot
Locker has to be careful with their suppliers. In the future, Foot Locker must establish a standard for
its suppliers for supplier to comply. Other than that, Foot Locker should create a supervision
committee and take regularly examines to make sure that their suppliers meet the criteria.
2.2.
Social issue: Poor working condition in Foot Locker’s suppliers
Foot Locker’s products suppliers has also been accused for poor working conditions and have low
wages in their manufacturing stores in developing countries. One of the largest supplier is Nike and
this organization is notorious of being cruel of their manufacturing stores in developing countries,
including Vietnam. According to Dara O'Rourke's article "SMOKE FROM A HIRED GUN: A CRITIQUE
OF NIKE’S LABOR AND ENVIRONMENTAL AUDITING IN VIETNAM AS PERFORMED BY ERNST &
YOUNG", night-shift stitching employees told me that their "standard" work week is 10.5 hours per
day, six days per week. This typical work week can result in 700 or more overtime hours per year,
much above the legal limit of 200 hours per year. Personal safety equipment (gloves, masks) is not
given on a daily basis. Workers "do not wear personal protection gear, even in high-risk areas where
the level of chemical fumes and particles frequently exceeds the standard." Tae Kwang Vina is
obligated to provide workers rising remuneration according on their abilities. Workers at skill initial
level are paid the minimum wage ($40/month) multiplied by a percentage, workers at skill level 2
should be paid $40 multiplied by a higher multiplier, and so on. According to one employee, the
corporation disregards this legal obligation, providing annual compensation increases that are
significantly lower than necessary (O'Rourke, 1997).
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3.
Global strategic options
3.1.
•
SWOT analysis
Strength
Strong Business Relationships: As an athletic retailer, quite possibly the largest key to success is
maintaining a product line that features brands with excellent consumer loyalty. This can help relate
the name of the retail outlet with the trusted product. Foot Locker has a strong association with big
footwear brands, which are widely recognizable worldwide. For years Foot Locker has maintained a
close relationship with Nike. Nike made up 70% of sales in 2021 and 75% of sales in 2020 at Foot
Locker’s retail stores.
Superior Capital Structure and Asset Management: For the most part, the corporation has
maintained its debt totals under control. Long-term debt currently accounts for only 5% of its capital
structure, and it maintains robust working capital at the same time. While these monetary assets are
unlikely to be utilized to acquire other privately owned firms, they can be used to forward the
company's foreign expansion plan.
•
Weakness
High Employees Turnover: A problem that many shops face, excessive staff turnover may have a
significant impact on the bottom line. And for a corporation with over forty thousand employees,
many of whom are paid the minimum wage, this may be a major issue. In the company review
conducted by Indeed, Foot Locker has a rating of 3.9 over 5 stars. Though having a decent rating
from employees, there are a significant number of them complained about the salary and working
condition. The possibility of a rise in the minimum wage might have a favorable influence on this
scenario, but until that happens, it will be an issue to keep an eye on.
•
Opportunities
According to AZ, the average spending of Vietnamese on fashion is 13.9%, second only to spending
on food (32.9%) and savings (14.9%). The value of Vietnam's fashion market in 2020 will reach $5.6
billion. In 2022 alone, having just recovered from the pandemic, the fashion market has earned $
2.23 billion, an annual growth rate of nearly 15% is expected (Lan, 2023). Furthermore, Vietnam is a
potential market for the fashion industry, including the leather-footwear industry. In 2019,
Vietnam's footwear consumption reached about 190 million pairs (average 1.9 pairs/person) and
tends to continue to increase because the average income in Vietnam has increased rapidly in recent
years (Hanh, 2020).
As the statistics showed, Foot Locker has the opportunity for entering in Vietnam’s retail market. As
a footwear retailer, Foot Locker has a strong association with big brands such as Nike, Adidas and
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Puma, which is widely recognizable worldwide. When Foot Locker decide to enter Vietnam’s market,
it will immediately become a strong competition with other domestic retailers such as Kicks Geeks,
Super Sports and Bitis with the advantage of selling product with under retail prices.
•
Threats
The State can participate by adjusting regulations on tax policies and infrastructure policies in the
direction of giving priority to furniture businesses. In particular, in localities, ENT tools is strictly
enforced to avoid favoritism for foreign enterprises over domestic enterprises. Along with that,
capital is a critical aspect for enterprises. Although the government is unable to directly operate to
assist capital for domestic firms due to trade agreement obligations, it can engage by "designing" a
credit package fit for retail businesses (Chinhphu.vn, 2016).
The retail business is eligible to incentives in accordance with the terms of the Investment Law 2014
and Decree 118/2015/NDCP regulating the Law on Investment. The following is the retail model and
location of the retail establishment: Projects eligible for special incentives: building and management
investment, rural business market or investment in trade fair centers, products exhibition, logistics
centers, warehouses, supermarkets, and commercial hubs are all eligible for investment incentives
(VN, WTO Center, 2016).
In terms of the Investment Law 2014 and Decree 118/2015/NDCP, there is significant challenges for
Foot Locker to meet the criteria of special incentives so that Foot Locker has to invest on establishing
retail stores. That means it has to meet the ENT criteria to open the second store in Vietnam.
Moreover, with the Vietnam Government’s policies on supporting domestic retailers, Foot Locker
will have to compete with other local retailers in the footwear industry.
3.2.
Production Strategy
3.2.1. Export
•
Advantages: When exporting to another market, a corporation could significantly expand
its markets, leaving it less dependent on a single market. It can lessen its dependence on a
single market by diversifying its markets. This strategic change would not only result in
expanded revenue sources, but it would also reduce the dangers associated with relying
too much on one market. By entering different markets, the firm may access a larger
consumer base and even reach new demographics and locations (Livingstone, 1976).
•
Disadvantages: The obvious drawback of exporting is the expense of transportation. It is
common to believe that transportation expenses are proportional to distance traveled.
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Indeed, two things aggravate the situation: the mode of transportation and the quantity of
handling necessary (Livingstone, 1976).
3.2.2. Licensed outsourcing
•
Advantages: The first is that by outsourcing non-core services to a trustworthy third party,
a firm may focus on activities key to its value offer and improve its competitive position.
Second, one of the primary purposes of outsourcing in general is cost reduction. When a
certain resource, whether human or equipment, is not required full-time, or when the
effort to get the resource cannot be justified, a particular requirement develops. Third,
through outsourcing, organizations have access to highly skilled employees who may not
be available to the client organization and may fully leverage the suppliers' investments,
developments, and specialized qualifications (Tayauova, 2012).
•
Disadvantages: Outsourcing has several drawbacks, including loss of managerial control,
security and confidentiality threats, quality issues, hidden expenses, and personnel
reallocation. These issues arise from managing external resources, which requires
specialized skills, contract management, and power negotiation. Security and
confidentiality obligations are often difficult to implement and audit, and financial services
industry rules restrict information access to investment bankers and brokers (Tayauova,
2012).
3.2.3. Offshoring product
• Advantages: Offshoring product boosts the company's availability by utilizing several time
zones and a staff with durable working capability. It expands the opportunities for
businesses to assist their clients as required. Furthermore, outsourcing products all assist
to lessen risks. Multiple teams in many countries collaborate to decrease risk. In the event
of a natural disaster or an unwelcome risk, the data and goods stored across several
locations aid in the support of the company (Jain, 2023).
•
Disadvantages: Communication is one of the most difficult challenges in international
operations, and it gets considerably more difficult when adopting offshoring product due
to barriers to communication and varied time zones. Such variances frequently obstruct
the smooth flow of information and collaboration required for successful project
execution. Language limitations can cause misinterpretation of needs or directions,
resulting in miscommunication. Coordination of meetings and conversations across time
zones may sometimes be a logistical headache, resulting in delays and decreased
productivity (Jain, 2023).
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3.2.4. Recommendation for Foot Locker on implementing product strategy
After examining the advantages and disadvantages of these production strategies, it is
recommended for Foot Locker that they should implement the process of using licensed outsourcing
the product when operating in Vietnam. This recommendation is given because of the fact that Foot
Locker has a very strong relationship with numerous of athletic apparel brands, especially Nike. Nike
made up 70% of sales in 2021 and 75% of sales in 2020 (Ciment, 2023), which is a significant statistic
emphasizing the relationship with Nike.
Furthermore, Nike has experienced in establishing their retail stores in Vietnam, so that they can
help Foot Locker on fulfilling the regulations of the Vietnam government of operating in Vietnam.
Nike has opened many retail stores in major provinces and cities such as Hanoi, Ho Chi Minh, and Da
Nang. This could help Foot Locker if the company enters the Vietnamese market. Foot Locker and
Nike partnership will help Foot Locker establish its retail stores in Vietnam.
3.3.
Retail strategy
3.3.1. Licensing
• Advantages: By licensing the brand, businesses can venture into foreign territories without
facing the burden of additional tariffs or the challenges of establishing relationships with
retail outlets or distributors overseas. This expansion method offers significant advantages,
such as bypassing the complexities involved in setting up physical stores or distribution
networks abroad. Through licensing, companies can tap into new markets and leverage the
existing infrastructure and market knowledge of their partners in foreign countries (Allcot,
2021).
•
Disadvantages: One disadvantage of licensing patents is that if the licensed partner has
poor quality control, it can significantly impact the brand or product reputation. Licensing
allows other firms to utilize copyrighted technology, but the licensor has limited control
over its application and maintenance. If the partner fails to adhere to strict quality
requirements, inferior products or services may be linked to the brand, causing customers
to lose confidence and loyalty (Allcot, 2021).
3.3.2. Company-owned stores
• Advantages: A major benefit for company-owned stores is expansion control. Controlling
the expansion of company-owned outlets is a significant advantage. If the company owns
its operations, it has far more influence over them. It also has a greater (or ultimate)
influence in where a new business is located and how it is marketed to the general public
(Home Franchise Concepts, 2022).
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•
Disadvantages: The growth of the company-owned stores are often quite slow. The main
company must raise cash to pay the costs of opening and staffing each additional site. As
a result, the company is in responsible for every profit and loss, as well as all business
choices and quality control. This create slow operation in each store due to the dependence
of the main company (Home Franchise Concepts, 2022).
3.3.3. E-commerce
• Advantages: When the company opens an e-commerce platform, it is not necessary to
have a physical store. Since there is no need for a physical store, ecommerce businesses
save on one of the biggest cost overheads that retailers have to bear. Moreover, since there
are no shelf size or store size limitations, ecommerce businesses are able to list numerous,
even all available different items from the company (Niranjanamurthy, et al., 2013).
•
Disadvantages: For an ecommerce business, its website is everything. Even a few minutes
of downtime can lead to a substantial loss of money, not to mention customer
dissatisfaction. Other than that, substantial information infrastructure is required to run
an effective ecommerce website. And when the company factors in denial-of-service
attacks, the scale of infrastructure needs to be greater (Niranjanamurthy, et al., 2013).
3.3.4. Recommendation for Foot Locker on retail strategy in Vietnam
To operate smoothly in Vietnam, Foot Locker should implement the use of their owned physical
stores in the region. The reason is that establishing a chain of physical stores owned by itself will
improve the brand proposition in Vietnam market, create significant customer choices over other
competitors. Also, the strong bond with Nike will help Foot Locker has its position in the market
thanks to the reputation of Nike and the relationship with Foot Locker.
E-commerce is also the excellent strategy that Foot Locker should immediately apply when
operating in Vietnam. With a high ratings of footwear apparels of Vietnamese people, Foot Locker
should expand its own e-commerce platform to be user-friendly with Vietnamese by adding
Vietnamese language in to the website. Also, updating the stock with shoes that made specifically
for Asian such as Nike EP shoes or more available sizes for Asian people also help Foot Locker attain
more customer satisfaction, thus increase their revenue and influence in Vietnam market.
3.4.
Global integration versus Local responsiveness
3.4.1. Global integration: Suppliers issue
With the current trend of globalization, Foot Locker needs to make adjustments to standardize in
choosing and cooperating with its suppliers. The identification and selection of supplier should be
conducted thoroughly by Foot Locker. Foot Locker should identify potential suppliers through a
thorough assessment process. Conducting market research, visiting trade exhibitions, and utilizing
17
industry networks may all be part of this. Suppliers should be properly evaluated once they have
been found, using predetermined criteria such as product quality, capacity, financial stability, social
compliance, and sustainability practices.
The evaluation on Foot Locker’s suppliers’ performance is also an important process that it should
standardize. To take words into actions, Foot Locker should create a mechanism for monitoring and
evaluating supplier performance. This might include performing frequent evaluations to track key
performance metrics including on-time delivery, product quality, responsiveness, and adherence to
sustainability standards. Suppliers that reach or surpass these performance parameters on a
consistent basis should be rewarded, while those who fall short should be given corrective action
plans.
3.4.2. Local responsiveness
When operating in Vietnam, not every principle and operation codes are suitable for Vietnamese
customers. Because of that, Foot Locker should take actions to adapt into this market, be responsive
with situations, and gain customer satisfaction. Learn about the local culture and customs in each
market where Foot Locker stores are located. Understanding the local language, social conventions,
consumer behavior, and market trends relevant to the location are all part of this. Localizing the
insights process will allow Foot Locker to gather distinct client preferences and adjust their services
accordingly.
Other than that, Foot Locker should establish a unique loyalty program built specially for
Vietnamese customers that collects client data as well as preferences. Foot Locker may get insights
into individual consumer preferences by studying user activity and purchasing patterns, enabling
customized marketing activities and product suggestions. This data is useful for analyzing local
segmentation of consumers and adjusting strategies appropriately.
III.
Conclusion
To operate in Vietnam market is not an easy task dues to the complication of Vietnamese
government and the overwhelming number of competitors. Foot Locker should take it seriously
when decide to enter the fertile market in Vietnam. Wrapping things up, Foot Locker should examine
the potential culture barriers, the social issues, particularly the suppliers’ ethic. Also, they should do
research on the company itself, identify its strengths and weaknesses and the opportunities or
threats that Vietnam market could provide. Based on that, Foot Locker should take action to
implement the optimize product and retail strategy to operate successfully in Vietnam.
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