Question

What strategic issues should TOMS shoes management and investors be most concerned with? Are there possible improvements to its competitive strategy? Are there internal weaknesses or external threats to its well-being that must be addressed?

Answer 1

Answer-

The first issue is the social issue. The strategy seems to be helping these poor communities in developing countries but it does not really solve their problem. Their problem is not only that the children don’t have shoes to wear, but the poverty of the whole society. What Tom shoes does serves as little more than a temporary painkiller, it does not have any life-changing impact. Many people might argue that even giving free shoes contributes very little to solving the problems, it’s still a good thing to do. But this “good thing” could actually do more harm than good. By giving free stuff, Toms is creating a tendency of dependence and somewhat destroying the responsibility of self-provision. Moreover, it disrupts the local economies by indirectly undermine their products. Who would buy a pair of shoes if they can get it for free. This could potentially lower the local price, material demand, labors demand. The company had set up five criteria for its giving partners to deal with this social issue. Two most notable criteria are: Giving shoes must in conjunction with health and education efforts; Providing shoes cannot have negative socioeconomic effects on the community where shoes are given. However, I think that Toms shoes should be directly involve in other charity acts rather than just through their giving partner.

The second issue with Toms’ strategy is also its internal weakness. From a business perspective, it is at risk. Toms’ competitive advantage is basically based on providing its customers the feel-good value, an intangible value rather than any real product value. Though its products do have very good quality, customers buy Toms shoes not exactly because of that, they do it mostly because it gives them the feeling that they have done something good to these poor children. This competitive advantage is rather unpredictable and unsustainable. Consumers are fickle when it comes to committing to brands based on nonfunctional attributes. They may eventually feel like that they have done enough of charity work.

There are external threat. Firstly, Toms shoes is facing some criticisms for its one-for-one business model. Some economists say that Tom shoes is damaging the economies of local communities where it does charity. Though this is a controversy with many different opinions, it still affects the reputation of the business. Another threat is that more and more companies are following the one-forone business model which will create more competitive pressure for Tom shoes.

Recommendation

My recommendations for the company are:

 Developing a new brands and product lines that appealed to different customers other than just those who appeal to charitable work. Because too much reliance on socially conscious consumers might make Toms lose its competitive advantage one day due to the increasing number of companies which are applying Toms shoes model.  Expanding their charity work from just providing shoes to health care, education and other long-term solutions. This would eliminate the criticisms of their purpose and build even a better image of their company in the eyes of consumers.

 Investing more on formal marketing and advertising to raise the consumer’s awareness as there are a lot of famous brand in the market.

 Expanding the distribution channel to reach out more consumers.