Converse Files for Bankruptcy
Environment
Over the last fifty years, domestic product sales have declined due to low-priced foreign imports. In 1960, foreign shoe manufacturers only controlled 4 percent of the market. In 1976, that number increased to 47 percent. In 1995, it almost doubled its market domination to 89 percent (Infomat). Despite the unfortunate decline of activity for domestic manufacturers, reduction of employment, and increase in the value of trade imports (shown in Table 1), the “US Commerce Department analysts believe there is hope for the industry” (Table 1: Export.gov), (Infomat). There is hope for those businesses doing well, such as Nike, Inc. Converse, on the other hand, has had some difficulties.
Firm
In 1908, Marquis M. Converse founded “America’s Original Sports Company,” the self-titled Converse. Being one of the oldest names in the footwear industry, Converse and its Chuck Taylor All Star sneakers had a good run in their time (no pun intended!). Unfortunately, what goes up must come down. Over almost a century, Converse gained its share of loyal customers and investors alike. Hence the investor backing when, in the early 1990’s, Converse began experiencing financial woes. Regrettably, investor support just was not enough and Converse eventually filed for bankruptcy protection in 2001 (McCarthy).
Market
Converse markets its athletic footwear and apparel primarily to those who practice a sports-oriented lifestyle. The products are focused on a low-priced, traditionally retro style that appeals to younger generations. Principal age groups include 16-35 years of age due to generally higher levels of activity. Converse manufactures men’s, women’s, and children’s footwear of many different styles, colors, and sizes (Converse).
Problem
Although Converse is consumer- and employee-conscious, its major concern in 2001 when filing for bankruptcy protection must have been its shareholders. One main goal for any company is to increase the wealth of its shareholders. In filing bankruptcy, Converse was essentially protecting its investors.
Its management attempted to “rebuild Converse’s reputation as a maker of top-of-the-line…shoes” (ESPN). It expanded some of its brands and took baby steps forward. Unable to bounce back after its financial difficulty, Converse had to accept a respectable offer from its rival, Nike, Inc.
Nike offered to purchase Converse for $305 million and agreed to take on some of Converse’s liabilities as well. The problem now, for both companies, lied in their marketing techniques. How would Nike and Converse market the purchase so that both companies transition through the buyout smoothly and successfully?
Solutions
Mi Casa es Su Casa
My home is your home. Create an environmental atmosphere centered upon sharing resources; mainly, athletes. Converse has had bad luck with its endorsers and Nike has been blessed. On the other hand, Converse has been very fortunate with its investors and loyal customers. If both companies take advantage of the other’s attributes, they will both find success.
If It Ain’t Broke
While Converse does need help with its choice of endorsers, it has done well in building a brand image throughout the years. With minimal assistance from Nike, such as advertising, public relations, and financial support during the merge, it may be beneficial to keep the event as simple as possible. Let Converse keep most of its positive ways, while Nike goes about the same business it always has.
Enemies Unite
Converse could gain status by association. Nike could gain amiability through association. Market the buyout as an idea to create one bigger and better company out of the two separate -but equal-entities. Advertising prospects include selling limited styles of Converse shoes in NikeTown stores, as well as creating a store especially for Converse shoes-ConverseTown-in which Nike would sell limited brands of Nike shoes.
Implementation
Mi Casa es Su Casa
Share resources to show that this merge is for the good of both companies, rather than letting Converse play the role of water boy. Whatever assets that can be shared economically will lower expenses and increase revenue. In particular, sharing athletic endorsers and investors will show that those people believe in both Nike and Converse.
For instance, film a commercial of Michael Jordan arriving in the locker room at one of the biggest games of the season. He suddenly realizes he forgot his Nikes! ‘Oh, no!’ he thinks. He reaches in his practice bag, and ‘ah hah!’ There are the shoes that he practiced in this afternoon-the very same shoes that got him started when he was a kid-his bright red Chuck Taylor Allstars! Jordan shoots…he scores! And the crowd goes wild…
Publicize that Converse investors, such as Dennis Rodman, are now investing in Nike in order to continue their support for Converse. If the newly merged company can keep its investors, surely customers will at least think about sticking around until half time.
Showing the current Converse and Nike customers that ‘two heads (or four feet) are better than one’ will hopefully not only keep those customers, but draw some new ones that have been on the divide and trying to decide to whom to trust their feet.
Appendix
Table 1 (Export.gov)
Footwear mfg (NAICS 3162 )
(Millions of dollars)
1997 1998 1999 2000 2001 2002 1998-1999 1999-2000 2000-2001
Industry Data
Value of shipments 4211 3764 3797 3760 3511 0.9% -1.0% -6.6%
Value of shipments (1997 $) 4211 3738 3768 3713 3466 0.8% -1.5% -6.7%
Total employment (thousands) 41.7 37.6 34.5 30.5 28.0 -8.2% -11.6% -8.2%
Production workers (thousands) 34.7 30.9 28.4 24.9 22.7 -8.1% -12.3% -8.8%
Capital expenditures 53.9 46.4 55.6 38.6 41.5 19.8% -30.6% 7.5%
Product Data
Value of shipments 3736 2942 3101 2923 2680 5.4% -5.7% -8.3%
Value of shipments (1997 $) 3736 2923 3079 2887 2645 5.3% -6.2% -8.4%
Trade Data
Value of exports 465 422 391 360 364 335 -7.3% -7.9% 1.1%
Value of imports 13,372 13,345 13,628 14,497 14,890 15,072 2.1% 6.4% 2.7%
Source: U.S. Department of Commerce: Bureau of the Census;
International Trade Administration (ITA).
Works Cited and Consulted
Converse. “Converse, America’s Original Sports Company”. www.converse.com/zfactsdetail.asp?fid=11. Visited January 14, 2006.
Department of Commerce. Economic Analysis. http://www.census.gov/econ/census02/naics/sector31/3162.htm. Last updated February 7, 2005. Visited January 14, 2006.
ESPN. Associated Press. “Nike Hopes to Cash in on Retro Converse.” July 9, 2000. http://espn.go.com/sportsbusiness/news/2003/0709/1578731.html. Last updated July 10, 2000. Visited January 14, 2006.
Export.gov. “Table: Footwear Manufacturing (in Millions)”. http://www.ita.doc.gov/td/industry/otea/industry_sector/tables_naics/31621.htm. Visited January 14, 2006.
Infomat. Fashion Industry Information Services and Search Engine since 1996. http://www.infomat.com/research/infre0000246.html. Last updated January 2006. Visited January 14, 2006.
“Investor Tools”. USA Today: Marketplace. Nike, Inc. NKE (NYSE) http://stocks.usetoday.com/custom.usatoday-com/html-profile.asp?symb=NKE. Visited January 18, 2006.
McCarthy, Michael. “Nike Laces Up Converse Deal”. USA Today. July 9, 2003. http://usatoday.com/money/industries/retail/2003-07-09-nike-converse-x.htm. Visited January 14, 2006.
Nike. “NikeBiz.com”. www.nike.com/nikebiz/nikebiz/jhtml. Copyright 2006. Visited January 14, 2006.
