Hush Puppies is the family owned business of Ricardo Swett.

This is the business of casual shoes and its retail outlets are in Chile. Hush Puppies in Chile had seen profits go up and sales blow up by an average of 30% per year since 1985. Hush Puppies had become the preferred brand of upper-class Chilean men by emphasizing excellence in design and by expanding a chain of up-scale retail shoe stores as well as a competent factory. Hush Puppies had become the most wanted brand of upper-class Chilean men and later expansion occurred into womens and childrens shoes. The general manager of Hush Puppies in Chile began to weigh up further expansion of the business in other Latin American markets. Ricardo was uncertain how fast the company should expand in these countries or whether efforts should be focused instead on promoting exports to North America or on consolidating the companys market position in Chile.

Company Synopsis:
In 1980, Hush Puppies Chile began functions through the resolute attempts of three brothers, Alfonso, Ricardo and Juan Pablo Swett. Later in early-1960s, the three brothers figured NORSEG, a start-up corporation that supplied safety equipment to industrial and mining sites all the way through Chile. Over time, these procedures were organized as separate companies under the family-owned Costanera S.A.C.I. Holding Co.

Wolverine World Wide:

Wolverine World Wide was concerned in expanding into Chile. This news was got by three Swett brothers in the spring of 1979 by their advertising agency, Veritas Ltd. Incorporated in 1954; Wolverine outlined much of its initial success in footwear market to its reliance on the production of casual pigskin shoes. Wolverine, pedestaled in Rockford Michigan, controlled a collection of footwear brands including Hush Puppies casual shoes, Wolverine work and outdoor boots, Bates uniform shoes and Brooks athletic shoes. During the 1960s and 1970s, Hush Puppies appeared as a most important brand with meticulous strength in the mens division.

Success in the U.S. was followed by international growth, to begin with in Canada and Europe. In the early 1980s, spurred by fears that the U.S. government might lift import quotas on low cost shoes from the Far East and Latin America, Wolverine shifted to pick up the pace its international expansion. Wolverine was appearing for an agent to import or manufacture Hush Puppies brand shoes in Chile under license. The Swett brothers commissioned market research studies in rejoinder to Wolverines initiatives and disclosed that the Chilean shoe market was dominated by formal, dressy products and that no companies successfully met the requirement for casual shoes. Bata Chile functioned first and foremost as a manufacturing company which sold the bulkiness of its output to small self-regulating stores all the way through the country. Bata also activated numerous dozen of its own retail stores throughout Chile and was reported to be thinking about additional growth. The brothers were predominantly noticed in the upper class market in Chile which, by experience from side to side international travel, was familiar with the Hush Puppies brand, quality and unique designs.

A shift to Retailing:
The brothers make a decision near the beginning on that retailing made available the greatest alternative for acquiring Hush Puppies into Chile in working with Wolverine. After compromising with Wolverine, Hush Puppies Chile was given restricted rights to import Hush Puppies shoes and expand retail outlets in Chile. Anticipations were that the costs for the first five stores, including leasehold improvements, training, and inventories and so on, would total about $2.0 million. Of this amount, about $1.0 million would be borrowed. The residual $1.0 million symbolized a considerable risk to the brothers. The best Hush Puppies shoes would be imported from approximately the world with about 80% coming on or after the U.S. given the stratification of wealth in Chile, these consumers contrasted constructively with upper-middle and upper class U.S. consumers.

Stores were positioned in big, suitable locations primarily in the Santiago metropolitan area. The sales staff was broadly trained to improved recount to the upscale customers and were well compensated, reflecting the longing for permanence and professionalism. As agreed ahead by the brothers, Ricardo supposed responsibility as the general manager of Hush Puppies Chile. Alfonso was engaged in most important investment decisions and strategic planning for all family owned businesses as well as a number of day-to-day judgments making at Hush Puppies Chile.

A Move into Manufacturing:

The bottom fell out of Latin American economies in 1982. In Chile, the GNP fell by 14% in 1982 alone. Between the 1982-1985, unemployment formally floated around 14%; unofficially, it surpassed 30%. During the same period, the Chilean Peso dropped by 300%, leading to a proportionate rise in import costs. In April 1982, the choice was made to move Hush Puppies Chile into shoe manufacturing. Both partners had the same opinion to make payment representative amounts of capital to make sure that manufacturing output met developed targets. In 1981, import quotas ended in the U.S. and Wolverine shifted uncompromisingly to shift production overseas. Under the joint venture agreement with Hush Puppies Chile, Wolverine would have right of entry to a new starting place of shoes made with low cost Chilean labor. In February 1983, a small new manufacturing facility was unlocked in suburban Santiago which comprised something like 10,000 square meters of manufacturing capacity, a two story decision-making office complex and factory retail outlet. Hush Puppies Chile and Commercial Puppies were both systematized with their personal board of directors, which included the three Swett brothers, as well as a small group of trusted, Western-educated managers from the working companies. Most directors served on two or three boards.

Speedy Growth:
From 1985-1990 the Chilean economy established enjoying rapid growth. Brooks Athletic Shoes was possessed by Wolverine and had advantaged in the U.S. by the upsurge in interest in physical fitness. As on the whole sales picked up, Hush Puppies Chile and Commercial Puppies centered further on building and maintaining key brands. Hush Puppies Chile managers observed the company as market sloping as opposed to manufacturing oriented, thus differentiating the company from many Far East suppliers. In 1987, the company founded a most important advertising program titled the pleasure of walking which was predominantly appealing to increasingly health conscious upper and upper-middle class Chileans. Television advertisements were also expanded which focused on Hush Puppies as declarations of quality and style. During the late 1980s and early 1990s, Hush Puppies Chile won three annual Wolverine World Wide awards for the quality of its advertising campaign and marketing strategy. The companys approach to strengthen the Hush Puppies brand succeeded. By the end of 1987, the production of shoes reached 265,000 pairs, an increase of 18% over 1986. In 1988, production increased an additional 15% to 305,000 pairs; in 1989, shoe production was up 29% to 392,000 pairs.

A shift into Womens and Childrens Shoes:

More endeavor was dedicated to product design and marketing to make stronger the companys arrangement in the womens shoe market. The womens product manager, Cardina Schmidt, believed that prior to 1990 the womens product line had not sufficiently satisfied the style and fashion demands of Chilean women. In order to construct Hush Puppies further appealing to women, high fashion shoes were imported from Italy, France and Argentina. Hush Puppies Chile also hired exclusive designers to develop its own collection of womens shoes. During this same period, the company also undertook a most important proposal in childrens shoes.

In early 1990, Hush Puppies for Kids were commenced, consisting of four different categories which varied according to the age of the child. Soft Puppies shoes were introduced for infants; Little Puppies were designed for children age one to three years; Young Puppies were introduced for children age four to eight years; and finally, Junior Puppies were designed for children age nine to fourteen years.

Amplifying the Athletic Shoe Position:

In the U.S., Brooks was a comparatively weak brand, information not altogether lost on fashion-conscious Chilean adolescents, and L.A. Gear was emerging as the top brand for adolescents. The opportunity to market a more fashionable brand in L.A. Gear was clear and Alfonso approached the company in the summer of 1990. After considerable discussion, L.A. Gear agreed in the fall of 1990 to work with Hush Puppies Chile to bring the L.A. Gear brand to Chile. L.A. Gear shoes would be imported from U.S. inventories or directly from the shoes manufacturers in Korea and China thus sparing Hush Puppies any manufacturing threats.

Wolverines Manufacturing point Purchase:

Costanera obtained the 30% of Hush Puppies Chile operations owned by Wolverine World Wide in December of 1991. In late 1989 and 1990, manufacturing facilities were enlarged over 30% in Chile in order to remain pace with flourishing demand. Plans called for production capacity to be increased by another 20% in 1991. At the same time, Wolverine was facing transforms in the business in the U.S. and was struggling to preserve capital. As a result, a buyout became an attractive option for both parties. The purchase of Wolverines 30% share of manufacturing was approximated to have cost Costanera approximately $3.6 million. Wolverine expanded its licensing agreement to Forus for twenty years. In addition, Forus pushed for and obtained the rights to manufacture and sell Hush Puppies brands in Bolivia, Paraguay, and Uruguay. Outside these countries, sales of Hush Puppies or

Brooks brand products could only be made to other Wolverine licensees. For Wolverine, Costaneras program for growth, sanctioned by the success obtained in Chile, made it the best company to build sales in Latin America. Outside these countries, sales of Hush Puppies or Brooks brand products could only be made to additional Wolverine licensees. For Wolverine, Costaneras program for growth, endorsed by the achievement acquired in Chile, made it the best company to put up sales in Latin America.

Extensive Market Appeal:

Hush Puppies was number one in market share; in the ABC1 womens market, Hush Puppies was number five in market share; and in the ABC1s childrens market, Hush Puppies was number four in market share.

Growth in Retail Operations:

Entire retail sales of Hush Puppies, Brooks and L.A. Gear shoes amounted to 328,000 pairs by the end of 1991. About 74% of these shoes were sold in 25 company-owned stores. An additional 9% of sales were produced through Hush Puppies Corners which had been instituted in shoe departments of 14 major retail department stores. Regarding 10% of the companys sales were also produced through small independent retail outlets. Franchise sales represented approximately 7% of total retail sales. By the summer of 1992, the number of company-owned retail stores in Chile had augmented to 26 with four more diagramed by year-end.

International Expansion:
Certainly Costanera was a much more balanced company by mid-1992 than it had been ten years earlier. It had a healthy balance sheet, a portfolio of accepted American brand names, improving manufacturing capabilities, world class design skills and

substantial marketing expertise. Undoubtedly Ricardo and several managers began to understand that the depth of Hush Puppies Chiles market penetration, predominantly in the ABC1 mens casuals would lead to augmented competition on or after new European and American brands. With these apprehensions in mind, Ricardo began thinking other substitutes intended for growth. A shift into mens dress shoes was refused because the segment was by now highly competitive and for the reason that managers at Hush Puppies Chile did not believe that their skill base would make available the company with a noteworthy competitive advantage.

Export OpportunitiesNorth America:

Hush Puppies Chile had at all times hoped to build up a strapping export business, particularly to North America and Europe. Hush Puppies Chiles manufacturing labor costs in 1991 averaged $2.00/hr. counting all benefits; in neighboring Argentina, wages in the shoe industry averaged from between $2.25 and $2.50 per hour. From a company point of view, a prominence on exporting appeared to build sagacity for two reasons. First, sales to the Northern Hemisphere could potentially offset cyclical sales in the Southern Hemisphere. Any supplementary export sales during the off-season would make available a better utilization of plant and equipment while minimizing fluctuations in employment levels. Second, the added export sales volume would contribute to ever-increasing manufacturing and new product development overheads, in that way increasing overall profits. Exports to North America and Europe maintained comparatively self-effacing. Hush Puppies domestic target market was also the high-end section which added design and service costs that negated many of Chiles labor cost advantages. A final difficulty was that direct and indirect labor costs symbolized only about 25% of total

manufacturing costs therefore limiting the companys ability to follow a low cost exporting approach. Because of these difficulties, more than a few managers in the company believed that an export strategy built on superior design and marketing had the majority chance to achieve something. The company had never critically judged shifting manufacturing to lower cost Asian countries. Difficulties in controlling overseas production and the need to respond to rather fickle customer needs destabilized the potential savings of overseas manufacturing.

Opportunities in Latin America:

From 1990 to 1991, sales growth increased speed to a staggering 35%, supported in part by the rapid growth of the Chilean economy. Many economists were predicting GDP growth of 10% per annum all the way through the remainder of 1992 making Chile one of the fastest growing economies in the world and an engine of economic growth in the region. The companys proposal in Latin America began in earnest in May of 1989 when Hush Puppies Chile began exporting Hush Puppies shoes to Uruguay. In 1990, Hush Puppies Chile contributed exclusive franchise rights to the Moliterno family, a diversified industrial company based in the capital city of Montevideo. Moliterno speedily instituted Hush Puppies Uruguay as a whollyowned subsidiary. Forus purchased 55% of Hush Puppies Uruguay in the spring of 1991. According to Ricardo, Hush Puppies Chile had at all times desired to be a partner with Moliterno. The original agreement included an option to buy a majority stake in Hush Puppies Uruguay that Forus decided to exercise. Hush Puppies Chile shifted to strengthen operations. Sales employees received additional training and new store locations were sought out. Essentially no Hush Puppies shoes were exported to Paraguay in 1991 and no changes were sketched for 1992. In Bolivia, a country of seven million, Forus instituted a licensing agreement with Global Trading Company of La Paz. Ricardo estimated that exports for 1992 would amount to about 15,000 pairs or about $U.S.

525,000. Because of triumphing import tariffs, retail prices in Bolivia were set at a 10% premium over Chilean net prices. In 1992, the companys efforts in Argentina were focused exclusively on promoting its Brooks line of athletic shoes. Coast Sport Argentina was established in 1991 and acted exclusively as a wholesaler for a variety of self-governing retail outlets in the country.

Recent Developments:
Ricardo was thoughtful after witnessing approximately a decade of accelerating growth and profits. By the summer of 1992, Ricardo was weighing a number of options to recommend to Alfonso and Juan Pablo for consideration. One major shove under consideration was to move aggressively into the retailing of apparel. While the combination of athletic shoe and clothing stores had proved a major hit in Europe, Japan and North America, it had yet to be effectively pursued in Chile. Costs for retail space in a typical up-scale Santiago shopping mall were estimated at 7% of net sales with leasehold improvements averaging about $U.S. A second option being considered was to open a chain of outdoor clothing stores. A third option for the company was the introduction of a new retailing perception for childrens shoes and apparel. A full line of merchandise would accompany a full shift into childrens retailing by filling out stores and providing an added draw for consumers. Behind the increasing attention in expanding the retail base of the company was the recognition that retailing was becoming more concentrated. Ricardo was also countenanced with the decision of focusing management efforts on either increasing sales in Chile or on expanding sales in other Latin American countries. Clearly, Ricardo had much to consider. While any major pronouncement would necessitate the maintenance of both Alfonso and Juan Pablo, Ricardo appreciated that they would be relying on him for bearing.

Identification of the Problems:

Hush Puppies started their business for mass market, but a major difference is that wealthy American consumers were generally not targeted by Hush Puppies in the United States. In December of 1991, Wolverine failed to support Hush Puppies Chiles ambitious expansion plans. New investment requirements in Chile as well as other countries, combined with the need to reinvest profits, translated into a negative cash flow for Wolverine. Hush Puppies buyout with Wolverine as Wolverine was facing changes in the business in the U.S. and was struggling to conserve capital. Hush Puppies Chile altered its name to Forus and Forus was licensed to sell brooks athletic shoes in Bolivia, Paraguay, Uruguay, Chile, Argentina and Peru, but they did not get the license to manufacture. Ricardo and several managers began to understand that the depth of Hush Puppies Chiles market penetration, mainly in the ABC1 mens casuals would direct to boosted competition from new European and American brands. Forus was typically over capacity in the period leading up to Fall/ Winter (February through July) and under capacity in Spring/Summer (August through January). One problem was that exports from Chile were supposed to contend with much lower cost footwear from China, India and the Philippines. Hush Puppies Chiles incredibly diversified product line boosted per-unit production costs through short production runs while at the same time removing opportunities for high volume exports.

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What strategic measures Hush Puppies Chile should take in order to decrease production costs and expand low cost exporting strategy to initiate high volume exports to other countries and stay competitive with European and American brands?

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A SWOT analysis is a strategic balance sheet of an organization; that is the strengths of the organization, the weaknesses of the organization, the opportunities facing the organization, and the threats facing the organization. It is one of the cornerstone analytical tools to help an organization develop a preferred future. It is one of the time-tested tools that have the capacity to enable an organization to understand itself, to respond effectively to changes in the environment. The purpose of the SWOT analysis is to provide information on strengths and weaknesses in relation to the opportunities and threats. Successful planning process for the human resources of an organization depends on creating a fit between the resources available to an organization and the opportunities present in its environment to minimize the weaknesses and face the challenging threats to survive and lead the industry. Evaluation of internal and external factors helps to analysis Strengths, Weakness, Opportunities, and Threats. In other words, in order to operate successfully in a continuously changing environment, the business firms should plan its future goals and strategies around its strengths and also try to overcome the weaknesses. Thus, the assessment of strengths, weakness, as well as opportunities, and threats become an essential task for management.

Strengths refer to the competitive advantages and other distinctive competencies

that a company can exert in the market place.

Weaknesses are constraints that hinder movements in certain directions. Opportunities primarily arise from the external environment, and refer to the
chances of gaining competitive advantages. The external uncontrollable variables that can create problems on organizational performances pose as Threats to business firms.

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Hush Puppies is a very famous brand all over the world. Wolverine, based in Rockford Michigan, controlled a portfolio of footwear brands including Hush Puppies casual shoes, Wolverine work and outdoor boots, Bates uniform shoes, and Brooks athletic shoes. Incorporated in 1954, Wolverine traced much of its initial success in footwear markets to its reliance on the production of casual pigskin shoes. The infamous basset hound became a widely recognized symbol for quality and comfort. During the 1960s and 1970s, Hush Puppies emerged as a major brand with particular strength in the mens segment.

To Hush Puppies, product design was an important issue. They have always come up with innovative designs of shoes. By emphasizing excellence in design and by developing a chain of up-scale retail shoe stores as well as an efficient factory, Hush Puppies had become the favorite brand of upper-class Chilean men. Expansion into womens and childrens shoes during the recent three years had also been successfully implemented. In order to come close to the ladies customers, the designers talked with them and tried to know their preference, so that Hush Puppies can come up with the desired design shoes of their customers.

In Chile, stores were designed as family concept outlets in which both parents and children could find comfortable, casual shoes. The best Hush Puppies shoes were being imported from around the world with about 80% coming from the U.S. This product quality was a great strength for Hush Puppies and as a result they were able to attract the customers in Chile.

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In Chile Hush puppies stores were situated in large, convenient locations primarily in the Santiago metropolitan area. The sales staff was extensively trained to better relate to the upscale customers and were well compensated, reflecting the desire for continuity and professionalism.

During the late 1980s and early 1990s, Hush Puppies Chile won three annual Wolverine World Wide awards for the quality of its advertising campaign and marketing strategy. To strengthen marketing efforts, advertising budgets were expanded, reaching 5% of sales in 1987. In 1987, the company started a major advertising program titled the pleasure of walking. This advertising campaign was a massive success and as a result hush puppies Chile won the award.

Hush Puppies Chile has always ignored the two most important market segments. One is the womens shoe segment and another is kids shoe segment. The companys strategy to strengthen the Hush Puppies brand succeeded. By the end of 1987, the production of shoes reached 265,000 pairs, an increase of 18% over 1986. In 1988, production increased an additional 15% to 305,000 pairs; in 1989, shoe production was up 29% to 392,000 pairs. Despite these impressive gains, the company remained relatively weak in these two important categories. By the end of 1991, Hush puppies had a market share of 30 % for mens shoes, whereas it had a market share of only 8% and 11 % respectively for womens and childrens shoes. As a result the competitors captured the market shares.

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Since, Hush Puppies Chile has always ignored the womens shoe segment, the customers were not happy with the shoe designs. Prior to 1990 the womens product line had not adequately satisfied the style and fashion demands of Chilean women. Good design was particularly important in the womens segment in which styles changed nearly every six months. Women in the target segment were particularly fashion conscious and were generally familiar with the newest fashions in Europe and North America. As a result, Hush Puppies Chiles market share in womens shoe segment was only 8 %. Hush Puppies lost the entire womens shoe market to their competitors.

Hush Puppies Chile was always dominant in mens shoe segment. But, Hush puppies Chile was relatively weak in childrens shoe segment because of several reasons. They also had several disadvantages in this segment. First of all, Hush puppies Chiles stores were not appropriate for selling kids shoes. On the other hand, other competitors had years in the market and most of all, they didnt have the machinery to develop a great collection for kids up until 12 years in age.

In December of 1991, Costanera acquired the 30% of Hush Puppies Chile operations owned by Wolverine World Wide. The buyout was prompted by Wolverines failure to support Hush Puppies Chiles ambitious expansion plans. During late 1989 and 1990, manufacturing facilities were increased over 30% in Chile in order to keep pace with booming demand. Plans called for production capacity to be increased by another 20% in 1991.

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Like most Chileans, Ricardo, Alfonso and Juan Pablo believed that the open market of 1980 provided an ideal opportunity to start a new business. The open economy put no barrier for entering into the Chile market. As a result, it was a great opportunity to enter into the open market of Chile. The brothers were particularly interested in the upper class market in Chile which, by exposure through international travel, was familiar with the Hush Puppies brand, quality and unique designs. Wolverine World Wide also appeared to be an open company; its managers were supportive and personable. The brothers agreed that any venture with Wolverine would succeed.

Hush Puppies Chile has always ignored the womens and childrens shoe segment. But it was not too late to invest in these segments. Especially the childrens market was showing potential opportunity. Surveys detected great opportunities for Hush puppies Chile in the childrens market. The market was very traditional. It offered old models in brown or white color. The market seemed willing to pay a higher price for shoes with aggressive colors and concepts such as comfort and security. Other competitors of Hush Puppies were not offering any products with aggressive colors. At the same time other competitors of hush puppies were not focusing on comfort and security. So, the market was demanding some attractive products and Hush Puppies was capable of satisfying the market for children.

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Since Hush Puppies had been manufacturing shoes in Chile for many years, it had always hoped to develop a strong export business, particularly to North America and Europe. Success in exports seemed likely given Chiles comparative advantage of low-cost labor and Hush Puppies Chiles excellent styling and productdevelopment skills. Hush Puppies Chiles manufacturing labor costs in 1991 averaged $2.00/hr. including all benefits; in neighboring Argentina, wages in the shoe industry averaged from between $2.25 and $2.50 per hour. In addition to being at least comparable in terms of costs, the quality and consistency of Chilean labor was generally regarded as superior to that available in neighboring countries. So, all the factors related to cost were in favor of Hush Puppies Chile and it showed a great opportunity to export products in North America and Europe.

From 1987 to 1991, the average annual sales growth for Forus, For-Shop and Coast Sport was 20% per year. From 1990 to 1991, sales growth accelerated to a staggering 35%, encouraged in part by the rapid growth of the Chilean economy. Strict adherence to free markets and free trade had led to booming economic growth in Chile with the economy expanding an average of 6% per year from 1987 to 1992. Many economists were predicting GDP growth of 10% per annum throughout the remainder of 1992 making Chile one of the fastest growing economies in the world and an engine of economic growth in the region. Customs duties on shoes averaged 70% in Paraguay but were being slowly cut under pressure from the General Agreement on Tariffs and Trade (GATT) as well as broader initiatives undertaken in creating the Southern Cone Economic Market. The company established a limited presence in Uruguay, Bolivia and Paraguay and was beginning to enter Argentina with its line of Brooks athletic shoes. So, the overall Latin American market was an opportunity for Hush Puppies Chile.

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A market research in Chile indicated that Bata, a large Canadianowned shoe company with worldwide operations, controlled an estimated 60% market share in Chile. Bata Chile operated primarily as a manufacturing company which sold the bulk of its output to small independent stores throughout the country. Bata also operated several dozen of its own retail stores throughout Chile and was considering further expansion. This expansion program would enhance the overall operational efficiency in Chile and it was a threat for Hush Puppies Chile, because Bata was the key player in the overall shoe market of Chile and it already captured more than half of the market share of Chile. So, further expansion would create a huge problem for the other competitors, including Hush Puppies.

In Chile independent retailers had considerable power over manufacturers in controlling which brands to promote and which styles to display. These independent retailers had good connection with Bata and they were assisting Bata to come closer to the customers. Bata was coming up with products according to their customer preference. In this case the independent retailers were playing a key role. On the other hand, Hush Puppies did not have such good connections with the independent retailers of Chile. As a result, it was quite difficult for Hush Puppies to expand their operation in Chile.

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After several years of promising economic growth, the bottom fell out of Latin American economies in 1982. Hit by slumping commodity prices, massive national debt, soaring interest rates, and worldwide recession, the Chilean economy, like every other in Latin America, plunged into a state of depression. In Chile, the GNP fell by 14% in 1982 alone. Between the 1982-1985, unemployment officially hovered around 14%; unofficially, it surpassed 30%. During the same period, the Chilean Peso dropped by 300%, leading to a commensurate rise in import costs. With Hush Puppies Chile totally reliant on imported shoes, the company was devastated by the economic downturn.

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Porter's five forces study is an outline for industry analysis and business strategy development formed by Michael E. Porter of Harvard Business School in 1979. It describes upon industrial organization (IO) economics to derive five forces that verify the competitive intensity and therefore attractiveness of a market. Attractiveness in this circumstance submits to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which accessible profits intended for all firms are driven to normal profit. Porter's five forces include - three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers.

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The bargaining power of buyers is high in the Hush Puppies Chile. This is a manufacturing company. So the bargaining power of buyer is always higher. Again the customer has always the ability to keep the firm under pressure. The customers sensitivity to price changes has a great impact on the companys operation. Moreover, there are other big competitors. So customers can anytime easily switch from this company to that. This is a great threat for the company. So, customers bargaining power is high. The buying volume is also good enough. As the customers buy more, so they have more chance to bargain over the companies strategies. Moreover, buyers have more information available of the companies as there is competition. Thus, considering all the factors, the Bargaining Power is good enough. Since there is chance of more business to arise, it is going to turn higher.

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Hush Puppies Chile is a well-established company which has suppliers to provide their products. The suppliers play noteworthy role in the company. But there is no specific information regarding the bargaining power of suppliers. The condition of suppliers, their switching cost etc information is not given in the case. There must be needed of distribution channel for the products. But the channel information is not provided here. Moreover, In the Hush Puppies Chile, most of the suppliers are possessed by the company itself. Here the supplier switching cost is higher since the companies own the suppliers. Moreover loyalty for the company is already exists. So supplier competition is not enough here.

The threat of substitutes is not very high here as customer switching cost is good enough because of product category. Shoe is a product which is needed to everyone. Nobody walk without it. But someone can use sandle instead of shoe. Though this may be a substitute of shoe, but there is no information about that type of products. Buyers are not willing to look for several substitutes. They need shoe to maintain their standard for several purposes and customers are happy with that.

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Moreover, if there is substitute, they cannot be able to provide their product in cheaper rate than that. Product differentiation facility will also not be able to gain by substitutes. Number of substitute products is not a very good enough. The allegiance of customers is effortlessly diversifiable thinking the tendency of consumers is backed up by lower switching costs. The greater the cost for customers to change to a substitute product the less the threat of substitution. But, Hush Puppies Chile has an economically developing region with a consumer base focused on price preferences making it easier for the substitutes to be available. But as shoe is really essential in modern days for everybody in their daily life, so threat of substitute is not an alarming number.

Hush Puppies Chile is a well-established market in Chile as well as in the world. This is a saturated Market. But other new comers also have options to enter into the market. There is potentiality of that. Though there is already some big giants like Hush Puppies Chile, BATA etc., and other companies can start business here with enough capital and well established designers. Still this is a growing industry; there are many companies who can wish to come here. It is also not very difficult for starting a business. Still if any new company wants to come in this business, then they need to have enough capital to make a place in this region. But they have a facility that production process is easy for them to learn. Moreover labor cost is not very high. Economic condition of the country is also well enough. Moreover, all the new comers need to have idea about the government of the country. Govern rules and regulations needed to maintain by the new companies. There is a challenge to face all the government regulations. Along with all these, they need to know all the distribution channels properly.

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The competition in this industry in very alarming and Hush Puppies Chile has many competitors. Bata is a big competitor for the company. Though Hush Puppies Chile is rich with fashionable shoes and well known fashion designers, other competitors also have such type of facilities. Brooks was positioned as the number three brand in the Chilean athletic shoe market after Diadora and Adidas. Adidas is a very famous company in terms of athletic shoes. L.A. Gear was emerging as the top brand for adolescents. The opportunity to market a more fashionable brand in L.A. Gear was clear and Alfonso approached the company in the summer of 1990.Moreover many shoe companies also emerged there with fashionable designs and colors. So the number of competitors is large enough. Again Adidas is a competitor who is big enough to defeat. But the Hush Puppies Chiles growth rate is also well enough. So the threat of competitors is very much here and the market is not free from competition.

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The growth and expansion of Hush Puppies Chile is, probably, one of the successful stories of the brand Hush Puppies. After negotiations with Wolverine, Hush Puppies Chile was given exclusive rights to import Hush Puppies shoes and develop retail outlets in Chile. Although no up-front fees were paid to Wolverine, in 1980 Hush Puppies Chile committed to opening as many as 25 retail stores within three years. Expectations were that the costs for the first five stores, including leasehold improvements, training, and inventories and so on, would total about $2.0 million. In April 1982, after economic downturn and rising import cost, the decision was made to move Hush Puppies Chile into shoe manufacturing. In November 1982, a partnership was formed between Wolverine World Wide and Hush Puppies Chile with 70% of the manufacturing joint venture owned by Hush Puppies Chile and 30% owned by Wolverine. Both partners agreed to contribute representative amounts of capital to ensure that manufacturing output met growth targets. As overall sales picked up in 1985, Hush Puppies Chile and Commercial Puppies focused more on building and maintaining key brands. The objective was to develop a reputation for excellence in marketing by emphasizing advertising, service and style. Feedback from retail stores proved a major strength in focusing design and manufacturing on consumer needs. The companys strategy to strengthen the Hush Puppies brand succeeded. By the end of 1987, the production of shoes reached 265,000 pairs, an increase of 18% over 1986. In 1988, production increased an additional 15% to 305,000 pairs; in 1989, shoe production was up 29% to 392,000 pairs. In December of 1991, Costanera acquired the 30% of Hush Puppies Chile operations owned by Wolverine World Wide. The buyout was prompted by Wolverines failure to support Hush Puppies Chiles ambitious expansion plans. During late 1989 and 1990, manufacturing facilities were increased over 30% in Chile in order to keep pace with booming demand. Plans called for production capacity to be increased by another 20% in 1991. With the buyout complete, Hush Puppies Chile changed its name to Forus, S.A. In January 1992, the name of Commercial Puppies was changed to For-Shop. Under the terms of the acquisition, Wolverine extended its licensing agreement to Forus for twenty years. In addition, Forus pushed for and received the rights to manufacture and sell Hush Puppies brands in Bolivia, Paraguay, and Uruguay.

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By the end of 1991, Hush Puppies Chile had succeeded in significantly broadening the market appeal of its Hush Puppies brands. In the ABC1 mens market, Hush Puppies was number one in market share; in the ABC1 womens market, Hush Puppies was number five in market share; and in the ABC1s childrens market, Hush Puppies was number four in market share. From 1987 to 1991, the average annual sales growth for Hush Puppies Chile was 20% per year. From 1990 to 1991, sales growth accelerated to a staggering 35%, encouraged in part by the rapid growth of the Chilean economy. The companys initiative in Latin America began in earnest in May of 1989 when Hush Puppies Chile began exporting Hush Puppies shoes to Uruguay. In 1990, Hush Puppies Chile granted exclusive franchise rights to the Moliterno family, a diversified industrial company based in the capital city of Montevideo. Moliterno quickly established Hush Puppies Uruguay as a whollyowned subsidiary. In the Spring of 1991, Forus purchased 55% of Hush Puppies Uruguay. After gaining effective control over retailing, Hush Puppies Chile moved to strengthen operations in the region. In Bolivia, a country of seven million, Forus established a licensing agreement with Global Trading Company of La Paz. Although the agreement had been in place for less than a year, two stores had been opened and Hush Puppies Corners had been set up in two department stores. In 1992, the companys efforts in Argentina were focused exclusively on promoting its Brooks line of athletic shoes. Considering the exploitation of available capital for Hush Puppies Chile, it can be phased in the growth stage with rapid expansion in different Latin American countries.

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The first concept which will be applied to the specialty shoe industry is the product lifecycle. This lifecycle is based on the assumption that all industries pass through a number of generic stages. The four generic stages are introduction, growth, maturity, and decline. They are defined using the rate of growth in sales in an industry. As an industrys sales grow and decline through the numerous stages, inflection points can be marked in order to determine where the stages start and end. This concept also makes the assumption that all industries go through an S-shaped pattern in their sales growth. From 1987 to 1991, the average annual sales growth for Hush Puppies Chile was 20% per year. From 1990 to 1991, sales growth accelerated to a staggering 35%, encouraged in part by the rapid growth of the Chilean economy. Strict adherence to free markets and free trade had led to booming economic growth in Chile with the economy expanding an average of 6% per year from 1987 to 1992. Many economists were predicting GDP growth of 10% per annum throughout the remainder of 1992 making Chile one of the fastest growing economies in the world and an engine of economic growth in the region. The market seemed willing to pay a higher price for shoes with aggressive colors and concepts such as comfort and security. By the end of 1991, total retail sales of Hush Puppies, Brooks and L.A. Gear shoes amounted to 328,000 pairs. About 74% of these shoes were sold in 25 company-owned stores. By the summer of 1989, Brooks was positioned as the number three brand in the Chilean athletic shoe market after Diadora and Adidas. In the U.S., however, Brooks was a relatively weak brand, a fact not altogether lost on fashion-conscious Chilean adolescents, and L.A. Gear was emerging as the top brand for adolescents. The massive export of cheap shoes from China, India and Philippine in Latin American market created opportunities for many of the global companies to take bite in the growing shoe industry. The market research also indicated that Bata, a large Canadian-owned shoe company with worldwide operations, controlled an estimated 60% market share in Chile. Bata Chile operated primarily as a manufacturing company which sold the bulk of its output to small independent stores throughout the country. Bata also operated several

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dozen of its own retail stores throughout Chile and was rumored to be considering further expansion. However, an emphasis on exporting seemed to make sense for two reasons. First, sales to the Northern Hemisphere could potentially offset cyclical sales in the Southern Hemisphere. Forus was typically over capacity in the period leading up to fall/ winter (February through July) and under capacity in Spring/Summer (August through January). Any additional export sales during the off-season would provide a better utilization of plant and equipment while minimizing fluctuations in employment levels. Second, the additional export sales volume would contribute to ever-increasing manufacturing and new product development overheads, thereby boosting overall profits. Considering the background of the Chilean Show industry the retail outlets played a vital role in the life cycle of the industry. The growth of the industry has often been improvised by government regulation and import tariffs.

In this context, the Hush Puppies Chiles former strategy was centered in offering a high quality casual shoes to a narrow consumer segment (upper-class Chilean men), therefore, a focus strategy. Later on, primarily thanks to the vision of management, the company moved to the diversification strategy to women and children shoe segment. Some of the advantages of this strategy are: customers have a lower sensitiveness to price, opportunity for higher margins, creation of entry barriers thanks to customer loyalty and brand uniqueness.

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During the 1960s and 1970s, Hush Puppies emerged as a major brand with particular strength in the mens segment. The infamous basset hound became a widely recognized symbol for quality and comfort. Success in the U.S. was followed by international expansion, initially in Canada and Europe. By 1992, Wolverine World Wide had established joint ventures or licensing agreements in over 40 countries including most of Europe, Japan and South America. In the athletic shoe segment, Brooks was positioned as the number three brand in the Chilean athletic shoe market after Diadora and Adidas. In the U.S., however, Brooks was a relatively weak brand, a fact not altogether lost on fashion-conscious Chilean adolescents, and L.A. Gear was emerging as the top brand for adolescents. L.A. Gear was a relative new comer in the athletic shoe industry and, to capitalize on its increasing popularity, had begun to search for international distributors. Therefore, after much analysis, the company is showing some details that according to concept of product life cycle, the company might enter in the growth stage.

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Financial analysis is the process of evaluating businesses, projects, budgets and other finance-related entities to determine their suitability for investment. Typically, financial analysis is used to analyze whether an entity is stable, solvent, liquid, or profitable enough to be invested in. When looking at a specific company, the financial analyst will often focus on the income statement, balance sheet, and cash flow statement. In addition, one key area of financial analysis involves extrapolating the company's past performance into an estimate of the company's future performance.

From the current ratio analysis we can observe that Hush Puppies Chiles current ratio has gone up significantly from the year 1990 to 1991. It clearly indicates that the company has enough current assets to pay of its current liabilities. It is always expected that, a company will have a current ratio of more than one. Hush Puppies Chile is in a very good condition to pay of its current liabilities.

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From the total debt ratio analysis we can observe that Hush Puppies Chiles total debt ratio has been very much consistent throughout the year1990 to 1991. It clearly indicates that the company has been using approximately 42% debt for financing its assets and rest of the 58% asset is backed up by the equity.42% usage of debt is a very nice portion for the company. If any company borrows more debt for financing its assets, then financial leverage goes up and risk increases. So, from this perspective, Hush Puppies Chile is not exposed to financial leverage risk.

From the Debt to Equity Ratio analysis we can observe that Hush Puppies Chiles Debt to Equity Ratio has been consistent throughout the year1990 to 1991. For the year 1990 Hush Puppies Chiles equity was 0.73 times than its debt. In the year of 1991 Hush Puppies Chiles equity was 0.68 times than its debt.

From the Equity Multiplier Ratio analysis we can observe that Hush Puppies Chiles Equity Multiplier Ratio has been consistent throughout the year1990 to 1991. It is not a co incidence that the Equity Multiplier ratio is 1 plus the debt to equity ratio.

From the Times Interest Earned Ratio we can observe that Hush Puppies Chiles operating profit was 4.48 times higher than its interest expense in the year of 1990 and it was 8.3 times higher in the year of 1991. It clearly indicates that Hush Puppies Chile was very much capable of covering its interest obligations.

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From the Total Asset Turnover Ratio analysis we can observe that Hush Puppies Chiles Total Asset Turnover Ratio has been consistent throughout the year 1990 to 1991. Higher the value of total asset turnover ratio, it is better for the organization. From the above table we can see that in the year 1990, for every dollar in assets, Hush Puppies Chile generated 0.81 dollars sales. In the year of 1991, asset utilization was better than the previous year and it indicates good asset utilization by Hush Puppies Chile.

From the Inventory Turnover Ratio analysis we can observe that Hush Puppies Chiles Inventory Turnover Ratio has been consistent throughout the year 1990 to 1991. But the inventory turnover ratio is too small. One reason behind this is that, Hush Puppies Chile was targeting the higher class people of the society and as a result they were selling premium products and premium products are not sold so quickly. So, it is expected that the inventory turnover ratio is too small.

From the Days Sales in Inventory Ratio analysis we can observe that Hush Puppies Chiles Inventory sits almost 150 days on average before it is sold. This is quite high for the company and the reason behind it is the small Inventory turnover ratio. Lower the inventory turnover ratio, higher the Days Sales in Inventory Ratio.

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From the Profit Margin Ratio analysis we can observe that Hush Puppies Chiles Profit Margin Ratio has been consistently increasing from the year 1990 to 1991. It is definitely a positive sign for the organization. Higher profit margin is a desirable situation for any company. Each and every company wants to increase their profit margin. In the year 1990, for every dollar in sales, Hush Puppies Chiles Profit Margin was 9.69%, which increased to 19.23% in the year 1991. So, profit margin almost doubled within one year.

From the Return on Asset Ratio analysis we can observe that Hush Puppies Chiles Return on Asset Ratio has been consistently increasing from the year1990 to 1991. It is definitely a positive sign for the organization. Higher Return on Asset is a desirable situation for any company. Return on Asset has almost doubled from 1990 to 1991 and it is really a good indication for the company.

From Return on Equity Ratio analysis we can observe that Hush Puppies Chiles Return on Equity Ratio has almost doubled from the year 1990 to 1991. It is definitely a positive sign for the organization. Higher Return on Equity is a desirable situation for any company.

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Country risk refers to the risk of investing in a country, dependent on changes in the business environment that may adversely affect operating profits or the value of assets in a specific country. In other words country risk is a collection of risks associated with investing in a foreign country. These risks include political risk, exchange rate risk, economic risk, sovereign risk and transfer risk, which is the risk of capital being locked up or frozen by government action. Country risk varies from one country to the next. Some countries have high enough risk to discourage much foreign investment. For example, financial factors such as currency controls, devaluation or regulatory changes, or stability factors such as mass riots, civil war and other potential events contribute to companies' operational risks. This term is also sometimes referred to as political risk; however, country risk is a more general term that generally refers only to risks affecting all companies operating within a particular country. Country risk is comprised of various aspects of risk involved in doing business in a particular country. For example: political risk, economic risk, currency exchange rate risk are all part of country risk analysis. Country risk can reduce the expected return on an investment and must be taken into consideration whenever investing abroad. Some country risk does not have an effective hedge. Other risk, such as exchange rate risk, can be protected against with a marginal loss of profit potential.

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The political situation of Chile is quite stable now a day. But the situation was really horrible in the mid of 1970s. Currently, Chile is a democratic country and the democracy seems quite stable to the international observers. Political polarization under the left wing government of President Salvador Allende (1970-73) brought the country close to a civil war, and ended in September 1973 with a coup detat led by General Augusto Pinochet. During his 17 year rule, Pinochet turned to the writings of free market advocate and Nobel Prize winning economist Milton Friedman to guide national industrial policy. Immediately after seizing power, Marshall Law was imposed, the economy was liberalized and foreign corporations were invited to return to Chile. Pinochets 1980 blueprint for political democratization was completed on December 14, 1989 when a national plebescite was held and Patricio Alwin, the Christian Democratic leader of a center-left coalition was elected president. He took office on March 11, 1990. While Augusto Pinochet remained commander of the nations armed forces in mid-1992, the emerging democracy seemed stable and strong to most observers. The success of Chiles free market reforms after a decade of stagflation and debt crisis amazed many observers. Most economists attributed Chiles enviable economic growth to its unrelenting dedication to free markets. By mid-1992, the bulk of the Chilean left was no longer anti-capitalist, and a remarkable degree of consensus existed in the country about the need to maintain a liberal market economy and prudent fiscal policies. The main dividing issues related to a new labor code granting

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more rights to unions, and the question of what to do about serious human rights violations that occurred under the Pinochet regime.

After several years of promising economic growth, the bottom fell out of Latin American economies in 1982. Hit by slumping commodity prices, massive national debt, soaring interest rates, and worldwide recession, the Chilean economy, like every other in Latin America, plunged into a state of depression. In Chile, the GNP fell by 14% in 1982 alone. Between the 19821985, unemployment officially hovered around 14%; unofficially, it surpassed 30%. During the same period, the Chilean Peso dropped by 300%, leading to a commensurate rise in import costs. With Hush Puppies Chile totally reliant on imported shoes, the company was devastated by the economic downturn. But the situation improved during 1985. By 1985, the Chilean economy started to turn around. Strict adherence to free markets and free trade had led to booming economic growth in Chile with the economy expanding an average of 6% per year from 1987 to 1992. Many economists were predicting GDP growth of 10% per annum throughout the remainder of 1992 making Chile one of the fastest growing economies in the world and an engine of economic growth in the region.

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In 1985, the Chilean Peso dropped by 300%, leading to a commensurate rise in import costs. With Hush Puppies Chile totally reliant on imported shoes, the company was devastated by the economic downturn. If peso declines then it is easy to export products outside Chile. But at the same time import cost increases if peso declines. Since, in 1985 peso declined by almost 300 %, import cost increased like anything.

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As it could be read from the case, the factors that were available for the market in Chile and other Latin American countries were pretty good for Hush Puppies Chile to market their product. Chile was Hush Puppies Chiles largest business operation which was followed by U.S. Since, Hush Puppies Chile was totally reliant on imported shoes; the company was devastated by the economic downturn in 1982. Only two options appeared possible: shut down in the face of massive losses or move into manufacturing. As a consequence to that, in April 1982, the decision was made to move Hush Puppies Chile into shoe manufacturing. However, a manufacturing facility in Chile made sense for a number of reasons. In 1981, import quotas ended in the U.S. and Wolverine moved aggressively to shift production overseas. Under the joint venture agreement with Hush Puppies Chile, Wolverine would have access to a new source of shoes made with low cost Chilean labor. Hush Puppies Chiles manufacturing labor costs in 1991 averaged $2.00/hr. including all benefits; in neighboring Argentina, wages in the shoe industry averaged from between $2.25 and $2.50 per hour. In addition to being at least comparable in terms of costs, the quality and consistency of Chilean labor was generally regarded as superior to that available in neighboring countries. Despite the fact, direct and indirect

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labor costs represented only about 25% of total manufacturing costs thus limiting the companys ability to pursue a low cost exporting strategy. Besides that, to make Hush Puppies more appealing to women, high fashion shoes were imported from Italy, France and Argentina. Hush Puppies Chile also hired exclusive designers to develop its own collection of womens shoes. Designers and managers regularly visited Hush Puppies stores to question women on desired design features like colors and styles. By 1985, strict adherence to free markets and free trade had led to booming economic growth in Chile with the economy expanding an average of 6% per year from 1987 to 1992. But, managers at Hush Puppies Chile also believed the company had no competitive advantage in importing. Estimates for 1992 were that the company would import about $U.S. 3.0 million in raw materials (mostly soles and leathers) and about $U.S. 1.7 million in finished shoes. The U.S. would supply approximately 25% of these imports with the rest coming from the Far East, Argentina, Brazil, Italy, Spain, Germany, Mexico and the U.K.

Hush Puppies in Chile had seen profits climb and sales explode by an average of 30% per year since 1985. By emphasizing excellence in design and by developing a chain of upscale retail shoe stores as well as an efficient factory, Hush Puppies had become the favorite brand of upper-class Chilean men. Expansion into womens and childrens shoes during the last three years had also been successfully implemented. Chile was becoming more westernized in its tastes and placed a high demand and value on imported and designed shoes. Once a foreign product was adopted in the domestic market, it usually commanded a high price. So, the market seemed willing to pay a higher price for shoes with aggressive colors and concepts such as comfort and security. Hush Puppies Chile had a few advantages such as the excellent Hush Puppies image which was attractive for children and easily identified. During late 1989 and 1990, manufacturing facilities were increased over 30% in Chile in order to keep pace with booming demand. However, after the buyout of Wolverine, by the end of 1991, total retail sales of Hush Puppies, Brooks and L.A. Gear shoes amounted to 328,000 pairs. About 74% of these shoes were sold in 25 company-owned stores. An additional 9% of sales was generated through Hush Puppies Corners which had been established in shoe departments of 14 major retail department stores. In promoting Hush Puppies Corners, For-Shop agreed to train sales employees and assist in designing and setting up displays. About 10% of the companys sales was also generated through small independent retail outlets. Franchise sales represented approximately 7% of total retail

39

sales. In 1991, the company had five franchise stores located in isolated cities in Chile. By the summer of 1992, the number of company-owned retail stores in Chile had increased to 26 with four more planned by year-end. The research also found that, from 1987 to 1991, the average annual sales growth for Forus, For-Shop and Coast Sport was 20% per year. From 1990 to 1991, sales growth accelerated to a staggering 35%, encouraged in part by the rapid growth of the Chilean economy.

Hush Puppies Chile management had defined the strategy of the firm to be emphasized on the excellence in design and developing a chain of up-scale retail shoe stores as well as an efficient factory. These related activities began with the establishment of a small new manufacturing facility opened in suburban Santiago in February 1983, which included approximately 10,000 square meters of manufacturing capacity, a two story executive office complex and factory retail outlet. As overall sales picked up, Hush Puppies Chile and Commercial Puppies focused more on building and maintaining key brands. The objective was to develop a reputation for excellence in marketing by emphasizing advertising, service and style. Feedback from retail stores proved a major strength in focusing design and manufacturing on consumer needs. Hush Puppies Chile managers regarded the company as market oriented as opposed to manufacturing oriented, thus differentiating the company from many Far East suppliers. By the end of 1985, Commercial Puppies was managing 22 company-owned stores and Hush Puppies Chile was supervising four franchise stores. To strengthen marketing efforts, advertising budgets were expanded, reaching 5% of sales in 1987. In 1987, the company started a major advertising program titled the pleasure of walking which was particularly appealing to increasingly health conscious upper and upper-middle class Chileans. Follow-up multicolor ads promoting Hush Puppies line of outdoor casual and hiking boots were placed in major newspapers and top magazines throughout the country. Television advertisements were also developed which focused on Hush Puppies as statements of quality and style. Moreover, a separate company, Coast Sport was organized to manage all Brooks sales. It was hoped that creating separate companies for athletic

40

shoes would allow greater focus on Hush Puppies brands as well as encourage new sales initiatives for athletic shoes. In order to make Hush Puppies more appealing to women, high fashion shoes were imported from Italy, France and Argentina. Hush Puppies Chile also hired exclusive designers to develop its own collection of womens shoes. Designers and managers regularly visited Hush Puppies stores to question women on desired design features like colors and styles. New window displays were designed to establish a more stylish image and a major television advertising campaign was launched. As a result of these efforts, sales growth in the womens segment increased dramatically. The company had leveraged multiple franchises and licensing to sell its shoes. In 1990, Hush Puppies Chile granted exclusive franchise rights to the Moliterno family, a diversified industrial company based in the capital city of Montevideo. Moliterno quickly established Hush Puppies Uruguay as a wholly-owned subsidiary. In Bolivia, a country of seven million, Forus established a licensing agreement with Global Trading Company of La Paz. Coast Sport Argentina was established in 1991 and acted exclusively as a wholesaler for a variety of independent retail outlets in the country. Coast Sport Chile owned 80% of the new company, with the remaining 20% owned by NORSEG Argentina, which had NORSEG Chile as a majority owner.

Through the analysis of the case, it could be found that the case does not mention much about any related or supporting industry that helped the Hush Puppies Chile, other than that of slight mentioning of an influential retail industry in the Chilean market. In Chile, independent retailers had considerable power over manufacturers in controlling which brands to promote and which styles to display. Besides, Retailers treated all brands alike, not giving special treatment to any brand in particular. The market research also indicated that Bata, a large Canadian-owned shoe company with worldwide operations, controlled an estimated 60% market share in Chile. Bata also operated several dozen of its own retail stores throughout Chile and was rumored to be considering further expansion.

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Therefore to offset the power of independent retailers, after negotiations with Wolverine, Hush Puppies Chile was given exclusive rights to import Hush Puppies shoes and develop retail outlets in Chile. Although no up-front fees were paid to Wolverine, the brothers committed to opening as many as 25 retail stores within three years. Expectations were that the costs for the first five stores, including leasehold improvements, training, and inventories and so on, would total about $2.0 million. As agreed, stores were designed as family concept outlets in which both parents and children could find comfortable, casual shoes.

After the political reformation in 1980s, Marshall Law was imposed, the Chilean economy was liberalized and foreign corporations were invited to return to Chile. Pinochets 1980 blueprint for political democratization was completed on December 14, 1989 when a national plebiscite was held and Patricio Alwin, the Christian Democratic leader of a center-left coalition was elected president. The success of Chiles free market reforms after a decade of stagflation and debt crisis amazed many observers. Most economists attributed Chiles enviable economic growth to its unrelenting dedication to free markets. By mid-1992, the bulk of the Chilean left was no longer anti-capitalist, and a remarkable degree of consensus existed in the country about the need to maintain a liberal market economy and prudent fiscal policies. The main dividing issues related to a new labor code granting more rights to unions, and the question of what to do about serious human rights violations that occurred under the Pinochet regime. Despite its interest in open markets, Chile has avoided involvement in Mercosur or the free trade zone that neighboring Paraguay, Uruguay, Argentina and Brazil hoped to have running by 1994. Confident after nine years of stability and growth, Chile in 1992 was aspiring to become the first Latin American county to join NAFTA. If NAFTA membership were to prove elusive, the government intended to pursue a free trade agreement with Japan, Chiles top export market after the United States.

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The companys initiative in Latin America began in earnest in May of 1989 when Hush Puppies Chile began exporting Hush Puppies shoes to Uruguay. With air freight to Uruguay averaging about $U.S. 0.55 per kg., transportation costs appeared favorable for exports. On the other hand, no Hush Puppies shoes were exported to Paraguay in 1991 and no changes were planned for 1992. Customs duties on shoes averaged 70% in Paraguay but were being slowly cut under pressure from the General Agreement on Tariffs and Trade (GATT) as well as broader initiatives undertaken in creating the Southern Cone Economic Market. Management believed that as the economy opened up in 1993, Forus would begin some modest exports.

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Internal Considerations
Product/ Service Demand Technology Financial Resources Absenteeism/Turnover Organizational Growth Management Philosophy

Techniques
Trend Analysis Managerial Estimates
(Shortage)
Recruitment - Full time - Part time - Recalls

Delphi Techniques

TECHNIQUES
Staffing Tables Markov Analysis Skills Inventories Management Inventories Replacement Charts Succession Planning

EXTERNAL CONSIDERATIONS
Demographic Changes Education of the Workforce Labor Mobility Government Policies Unemployment Rate
(Surplus)
Reduction - Layoff - Termination - Demotion - Retirements -

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The human resources planning model is a method companies can use to make sure it has enough employees and the right employees to carry out the various functions of the company. The human resources planning model encompasses three key elements, which include predicting the employees your company needs, analyzing if the supply of potential employees meets your demand and learning to balance the supply and demand of employees.

Internal Considerations:

There is sufficient information in the given case about the demand of Hush Puppies shoes. Good quality shoe is a product and the demand of quality shoes is high not only in Chile but also in the whole world. Hush Puppies brand product is highly demanded in the high class people. They are doing business with various types of shoes like shoes for children of various ages, shoes for women and shoes for men. This variation had played an important role to expand their business and increase their sales.

Justification:
In a word, the essence of demand is the willingness to exchange value goods or services. Demand of shoe is world-wide. So it is already justified. In a word, the essence of demand is the willingness to exchange value goods or services.

Hush Puppies is a well-known brand not only in South and North America but also in the whole world but the Asian market is in behind position other than Europe and American market. They have well and strong technology to prepare proper and best quality shoes. Enough technology can do it properly to fulfil the demand of all ages of people (Children, male and female)

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Justification:
The company uses different updated and modified technology to prepare the best quality shoes for all high class higher middle class people. Technology is needed to fulfil the demand of people. Technology is the making, usage, and knowledge of tools, machines, techniques, crafts, systems or methods of organization in order to solve a problem or perform a specific function. It is very nicely justified that modern technology is needed to serve and fulfil the customer demand and also to increase the sales.

In the case there is a lot of financial information about the company Hush Puppies. During 1987 to 1991 the amount of purchase of leather and raw materials $6,302 and the projected amount is $2,000. The royalty of Hush Puppies is $1,032 and the Brooks is $441. There are much other financial information in the Balance sheet and the income statement. The net income of Fours, S.A in 1990 is Ch$379,477,518 and in 1991 is 979,686,268. All other financial information is available in this difficult case.

Justification:
Hush Puppies have enough financial resources to expand their business and they can start manufacturing in other countries and they can make enough profit with enough financial resources. There are various sources of financial resources but indiscriminate choosing of these resources may bring devastating result for the company.

There is no information provided about the trend analysis in this case.

Growing from local company to an international company, there is enough information in the case. Companys growth is very rapid and Hush Puppies has a strong bonding with other foreign companies to get the sustainability in the particular shoe industry. Shoe companies of other countries have good relation with Hush Puppies and they got a good opportunity to capture new market and keep the continual growth. Commercial Puppies was managing 22 company- owned stores and Hush Puppies Chile was supervising four franchise stores.

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Justification:
Organizations value growth. However, liberalized global environment requires organizations to plan and ensure growth for their very survival. The organizational growth requires adoption, change and innovation.

There is a lot of information about the management philosophy. If management is not so strong then it is impossible to grow local to international. Alfonso, Ricardo and Juan Pablo Swett are three brothers and they are the top management of Hush Puppies Chile. There are another one named Sebastian Swett, a second generation family member and product manager of childrens shoe. They are doing well to get the maximum share of that particular industry. Now Hush Puppies is a name which can solve problem in a minute with their strong management team and top level managers.

Justification:
Having a wide spread management philosophy is very important for an organization as it gives employees the overall idea about how to control various firm operations and how to treat competition as well as competitors.

Techniques:

There is no information provided about the trend analysis in this case.

There is some information provided about managerial estimates in this case. Management Estimates are the opinions (judgment) of supervisors, department managers, experts, or others knowledgeable about the organizations future employment needs.

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Justification:
To expand the business they need new people for production of new products. Also the management is expecting that their sales will be increased in future. To increase the sales new employee is required as there will be increased in the production. So it can be said that management must have a plan to materialize their new plan of increased sales and introduction of new product line successfully.

There is not information provided about the Delphi Techniques in this case.

External Considerations:

There is enough information about demographic changes. The gender and the age limit are two main important factors for Shoe Company like Hush Puppies. Shoes for children of different ages, shoes for male and shoes for female are very important concern. These should have taken in consideration for increase the sales of shoes. There is also information about Argentina, Peru, Paraguay, and Uruguay and also about United States of America. They have huge amount of chemical specialist to refine the oil and make them usable and they also have moderate number of other engineers.

Justification:
In this present fashionable world, well designed and quality shoes are needed to is needed to every person even in children. So the demand is very high. Hush Puppies is now a big figure in Chile, Latin America as well as in the whole world. So the demography is a vital figure for oil shoe business in the world and they are a well performer in this shoe manufacturing industry in Europe and Latin America.

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According to the case there is no available information about the education of the workforce..

According to the case there is no available information about labor mobility.

There is not enough information about government policy in the case. For running the business in Chile and other Latin America and Europe must have to follow the Government Policy.

Justification:
Government policy usually influences important organizational decisions, including the identification of different alternatives such as programs or spending priorities, and choosing among them on the basis of the impact they will have on the nation or to its public.

There is enough information about unemployment rate in Chile in this case. It is matter of concern for any country If the unemployment rate is too high for that specific country.

Justification:
Between the 1982-1985, unemployment officially hovered around 14%; unofficially, it surpassed 30%. During the same period, the Chilean Peso dropped by 300%, leading to a commensurate rise in import costs.

Techniques:

We did not find any information about Staffing Table in this particular case.

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We did not find any information about Markov analysis in this particular case.

There is not too much information about the skill inventories in the case. The technical people are very demandable here because of various shoes manufacturing technology. To run the high quality technology, Hush Puppies needs well skilled and well trained labors and the HR department will provide the skilled people.

Justification:
The Companys business strategy is to use its accumulated utility experience and expertise to improve the profitability of its existing shoe business in Latin America and to enhance the value of other businesses it may acquire in the whole world.

There are some inventories about the management inventories in this case. There are another one named Sebastian Swett, a second generation family member and product manager of childrens shoe. They are doing well to get the maximum share of that particular industry. Justification: It is very nicely justified that to move globally management inventories are very important to capture the market. To spread the business in Europe, North America, Latin America and as well as in the whole world, they should take some initiatives to start management inventories.

There is not available information about the replacement chart in the case.

There is not available information about the succession planning in the case.

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After analyzing the considerations and techniques of forecasting labor supply and forecasting labor demand we have seen that the labor supply is not much affected here but there are some considerations which indicate the demand for new employees in the company in future. Here To do the balancing of supply and demand Hush Puppies should consider recruitment decision that is can hire efficient employees. Now Hush Puppies is doing the market research to launch a new product line successfully which is new cloths product line.

RECRUIT

In order to do the proper utilization of human resource in the organization, Hush Puppies should create an effective workforce by means of selecting the right number of people at the right time for the right job, compensating them to motivate and develop and retain them by effective training and career development in customization. Some steps should be taken and they are: Firstly, Hush Puppies should recruit and select the efficient employees for full time position and hire part time employees in contractual basis through proper recruitment and selection process. In order to ensure that right people job evaluation process should be sound and flawless. They should include different approach like external hiring, informal interview and select people who fit their culture. What businesses need and HR should be providing are innovative solutions to business challenges. Efficient service at a lower cost, to sell and service more of them, and to do so at the highest possible profit margins is very important for Hush Puppies Chile.

LAYOFF

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Internal Recruitment:
In this case Hush Puppies can go for the internal recruitment as there must be some employees who are very efficient in the company as the existing products line are doing very well in the market. So Hush Puppies can hire those employees for the successful development and launch of new products. This is called identifying the critical talent.

Identify "Critical Talent":

At first Hush Puppies will need to define the skills that are critical to its business strategy, and then identify the people within the organization who possess these skills. These individuals are considered the "critical talent." They are not necessarily the most highly paid executives. Instead, they are people who have highly developed specialized skills and know how to get things done within the organization. This will be cost effective as well as efficient for the company to hire some efficient employees from within the organization because they will know well about the company and its objectives.

External Recruitment:
After fulfilling employee demand from within inside, Hush Puppies needs to recruit from outside as part-time and full-time basis. As is a new product line for the company existing employees will know less about the technical and product part of the products. That why they will need to go for external recruitment which will help the company by providing new ideas fresh perspectives, reducing expensive training by hiring experienced employee, allowing rapid growth, and increasing diversity.

Recruit Salespeople on Full-Time Basis:

Salespeople play a very important role in Hush Puppies in creating the demand and successfully selling of the shoes. From the market research, Hush Puppies found out that the women and children prefer to buy from the salespeople who come to their house rather than buy from the supermarkets.

Recruit Workers for the Production Process:

As this is a new product for the Hush Puppies, the existing workers have not much idea about the production process of the products. For the effective production of the trash bags Hush Puppies needs to hire people who are expert in the production of new products.

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