Geox - Main Project

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Vanessa Meheut

Israel Roman

Alfredo Maldonado

GEOX breathes Entrepreneurship and Innovation Strategy Project

GEOX breathes: An innovation-based business strategy

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INTRODUCTION

In the macroeconomic level, innovation is widely seen as a strategic driver of national

competitiveness in the long run since it is the only “good” that does not suffer from diminishing

rates of return. According to the World Economic Forum, innovation is particularly important

for economies as they approach the frontiers of knowledge and the possibility of integrating and

adapting exogenous technologies tends to disappear. Therefore, innovation policies have been

undertaken by governments to assure economic growth in the globalized landscape.

In the business world, innovation comes to be a crucial driver in the companies’ strategy in

order to create a sustainable competitive advantage in the sense of that it stimulates an ongoing

improvement of the quality of a company’s services and products portfolio and a search of

organizational and productive flexibility to react to market changes faster than its competitors.

Even though the applicability of innovation is widely known in industries such as internet,

healthcare, computer, and telecommunication, it is becoming popular in economic sectors that

one could never imagine: the footwear market is a good example of this current tendency.

The Italian footwear brand Geox has shown how building up a unique strategy around

innovation can lead a company to position itself as the second leader of its market in less than a

decade. The present project has the purpose of showing how Mario Moretti turned an idea into

a successful business; we will first explore through the grassroots of the Geox breathes®

patented system and will then give an insight of the strategy implemented to commercialize

such an innovation.


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GEOX: THE NEW LEADER IN THE ITALIAN FOOTWEAR MARKET

“Geox was born in Italy, home to creativity and ideas. Each Geox

product is the result of patented researches which are carried out in our

laboratories. Each new collection is created by the best Italian designers.

Geox breathes and walks all around the world thanks to its double soul

made of Italian fashion and technology”.

Mario Moretti Polegato

Geox Chairman

Geox stands out in the extremely competitive footwear and apparel market for its ability to

make its products “breathe”1. The Geox Group creates, produces, and distributes footwear

and apparel; its extraordinary success is due to the technological characteristics of its product

portfolio that improves foot and body comfort in a way that consumers are able to appreciate

immediately. Geox value proposition is complemented with the fact that the company has

followed a footwear style that is in line with the latest fashion trends in the world. The

company looks to the future being guided by its mission and keeping its corporate values

(Exhibit 1) while always respectful of the quality of interpersonal relationships and business

ethics.

According to Shoes Intelligence 2008, Geox is market leader in Italy in its own segment and is

the second brand world-wide in the “International Lifestyle Casual Footwear Market”- after the

British brand Clarks. Its financial results for the fiscal year 2008 also show its outstanding

performance in the market having net sales for above $€ 892. Furthermore, despite of the

international economics downturn and a slowdown in consumption, it achieved a growth of

16% in comparison to 2007 (Exhibit 2). Mario Moretti, the Founder and Chairman of Geox,

wants to go further with the company. He is now considerably investing to improve its leather

sole’s patent, intends to strengths its presence in critical markets- Europe, Canada and USA- by

opening new Geox stores-it has now 940 mono-brand Geox stores including 640 outside Italy-,

and hopes to reinforce its competition against the big players of the athletic shoes. Is Geox

ready to become the absolute international leader in its market?


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I. THE INNOVATION

THE HISTORY BEHIND THE GEOX INNOVATION

From wine producer to tech-innovator

The Geox name was born from the fusion of the greek word “GEO” (earth in greek) where

everybody walks, and from the letter “X” that is a symbol of the technology. The origin of the

name is an evidence of the company’s DNA that has based its success in a revolutionary idea

that has made of the comfort, well-being and health its main drivers.

In 1989 Mario Moretti Polegato that worked in the agricultural and wine sector creates the

concept of “the shoe that breathes”. Like normally happens, the innovative ideas are born

fortuitously. The Geox business idea did not need of brain storming sessions or complex

strategic analysis marketing, but just from an allergy of the entrepreneur to the sweaty feet.

Moreti Polegato was in Reno, Nevada, in a wine exhibition when he decided to jog in the

desert, the weather was hot and the shoes did not make easy the transpiration, so he decided

to cut a hole in the soles of his running shoes. His feet immediately felt cooler and the idea of

the breathing sole was born.

Developing the first prototypes of rubber soles

The introduction of the rubber sole happened more than 50 years ago and had represented an

important technological improvement that changed the life of millions of people around the

world. Thanks to the rubber sole the shoes became waterproof, but still the rubber sole did

not allow the feet to transpire even considering that feet produce 100 liters of sweat each year.

Back in Italy he started to research in a small laboratory of a shoe company, property of his

family, and develops the first prototypes of a shoe with a holed rubber sole, that allowed the

feet to transpire while keeping waterproof. It manages to adapt a membrane that was originally

used by the NASA in the astronauts outfit: a Teflon-like membrane whose latest version has a

billion micro pores per square centimeter. The micro pores are much smaller than a droplet of

water but larger than a molecule of sweat vapor.


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Towards children, women and men shoes production

The membrane was patented. At first he just wanted to license the technology to shoe makers

and get back to make wine, but for three years no company was interested in the concept of

the “shoe that breaths”. Moretti Polegato believing in the potential of his invention decides to

produce shoes by himself. Not having knowledge of the potential market, and not having a

sample to test its prototypes, he decides to give away for free the shoes to the children

orphanages that immediately used the shoes allowing to the Geox technicians to obtain a quick

feedback and develop the first line of shoes for children within a year.

Two years later, in 1995, Geox begins to develop shoes for men and women. The Geox shoes

manage to overcome the trade-off between comfort and hygiene and begin to being well

accepted in the market. The production process was nearly full outsourced and Geox

concentrated on the main enterprise functions like Marketing, Distribution, Sales and especially

R&D. The brand was heavily advertised and given that the production was outsourced, it

allowed to the company to diminish costs, keep flexible and invest in activities that generate

value.

Discovering the leather soles and going abroad

In 1999 the company laboratory, that is constantly studying the human body transpiration and

heat dynamics, develops a solution that allows the hot air and humidity produced by the body

to be conducted through a special fabric around the body, and be dispersed into the air. This

discovery allows the company to move from the shoe business to that one of the total look,

because the invention is applied to jackets, coats, etc. In 2000, Geox started its international

expansion targeting Europe to launch its product line and to observe the dynamics of demand

for shoes.

In 2001 the Geox laboratory develops a waterproof leather sole, based in its famous

waterproof and breathing membrane, that eliminates the sensation of humidity when the

leather soles become wet by the rain or the terrain.


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Investing in marketing and training a sales force

Also in this year Geox begins to launch its mono-brand points of sale through direct ownership

or franchising. These stores are decorated (Exhibit 4) in a way that the technological Geox

innovations are clearly perceived by the customers and the employees are trained to explain to

the clients the benefits of Geox technology, so as to collect the comments and suggestions

made. For this purpose it is created also in this year the Geox School in order to infuse in the

new employees the GEOX DNA, meaning philosophy and specialized training for its particular

function.

Going public to the Milano Stock Exchange

In 2004 Geox launches its successful IPO in the Milano stock exchange and starts confronting

to the Chinese producers without a flinch, but by opening new stores and new models of shoes

and clothes for men, women and children targeted to the middle income consumers, that

transform the brand into a family friendly brand. But the Geox innovation doesn’t stop here, in

2007 launches in Dubai its line of transpiring military boots that are currently used by the Saudi

army.

New challenges

The next trick of Geox are its new trainer shoes, with his patented “no-sweat” technology that

went on sale on the Christmas of 2008, facing Geox in a battle against well established shoe

behemoths Adidas and Nike.

THE FOOTWEAR INDUSTRY IN EUROPE

The footwear industry is a sector that is now in a mature stage in Europe. The players that are

operating in this market have very fragmented market shares, that obligate them to focus in

cost based strategies or differentiation strategies to mange to grab decreasing margins. With

the changes that globalization has caused this situation has become worse.


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The bigger companies, which have stronger managerial and entrepreneurial skills, have managed

to take the opportunities of development, among them the production outsourcing into low

labor cost countries. In contrast the small companies suffer and are constrained in many cases

to abandon the sector. According to exhibit 5, it is clearly noticed the production decline, the

export stabilization and the increase in the imports.

The sector has seen the exponential growth of the Chinese competitors, especially in the low

cost segment. With the elimination of the duty and quota barriers in 2005, the number of shoes

coming from China into the European Union has increased to 1.25 million of pairs (Exhibit 5)

and represents the 64.5 % of the total European imports; other countries with increasing

imports to European Union are India and Brazil.

THE FOOTWEAR INDUSTRY IN ITALY

Italy has a long shoe making tradition: the value of the “Made in Italy” brand in this sector is

recognized thorough the world and the premium prices of the Italian shoes are proof. In the

main regions of shoe making traditions (Marche, Toscana, Veneto, Lombardia, Campania, Puglia

and Emilia Romana) are concentrated the 96.7 % of the national companies and 96.3% of the

workforce.

In recent years this companies have been forced to move its production and raw materials

purchasing to remain competitive at world level. This has translated in a stable sales level of 7

billion euros, with less shoes produced, indicating that the medium price of the shoes has

increased. This indicates the repositioning of the Italian footwear industry into the high end

markets. The products in the economy zone are abandoned to the Chinese competitors in

favor of a higher quality production.

The biggest Italian companies have bet to the value of the Italian style, bigger investment in

publicity and the development of aggressive distribution politics. At the same time, they are

outsourcing the low added value production phases and targeting the new emerging economies

like India.

Is finding a new strategy some kind of mission impossible for companies operating in such

mature markets as footwear?


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One of the answers that Geox has for the above questions lie in its R&D policy: since the first

patent, dating back to the early 1990s, Geox has continued innovating, investing heavily in

research and development. The Geox’s Research and Development laboratory is a state of the

art facility. In temperature controlled environments, shoes are tested for different ambient

conditions. Sweat simulators measure humidity by injecting water into heated shoes, mimicking

glands in the feet. Walkmeters apply tens of kilos of pressure to shoes that are then taken on a

200-km endurance walk. Fleximeters put Geox patented soles through rigorous test of tens of

thousands of flexions. Experiments and tests are performed on materials, processes and

products in disciplines ranging from chemistry to physics, to orthopedics, to foot ergonomics.

Many research activities result from formal cooperation with Italian and European university

departments and international research centers (a broader explanation of this issue will be

provided on section II, Value chain: leader by necessity)

This conspicuous research effort has resulted in a stream of patented inventions and

innovations related to the original concept, as well as many relating to materials (e.g. plasma

applications), products (e.g.: the breathable leather shoe), processes (e.g. glue saving assembly

and sewing systems allowing improved shoe perspiration and flexibility), equipment and

machinery (e.g. for shoe sole molding and injection). This series of corollary patents developed

around the original patent have also the function to make it impossible, for competitors, to

simply copy the product when the original patent expires. In fact, Geox currently has some

thirty patents and the original one, which expires in 2009, will be practically unusable by

competitors because of subsequent improvements.

THE LEADERSHIP THAT DROVE GEOX’S SUCCESS

In a recent interview to The Sunday Times2, Moretti states that “There are three kinds of

entrepreneurs, those that don't see, those that can't see and those that foresee. The best are those that

foresee. You must be innovative beyond the imagination of consumers.” This business thinking is

more likely to be found in the US but among in Italian company where the majority of business

are family owned.


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Moretti is a third-generation wine maker and his vineyard, Villa Sandi, is one of Italy's most

prolific wine producers. He and his younger brother, Giancarlo, had every intention of carrying

on the family's wine business after the death of their father in a Ferrari accident. But his life's

course took a strange diversion in the early 1990s, when he came with the idea of “shoes that

breathe”. Now, Moretti has left the wine business to his brother and his team so he can devote

his energies to eliminating sweaty feet.

Following his intuition, Moretti started Geox slowly, producing only children's shoes in Italy,

before expanding the range. He then embraced franchising to roll out his retail arm quickly -

only a fifth of his mono brand shops are wholly owned. In another interview with The Globe

and Mail newspaper3, Moretti says that he has “no intention of selling Geox - he owns 71% of the

company - and hopes to pass it on to the next generation.”

Even though, analysts are concerned that Moretti’s enthusiasm for breathable technology might

lead him astray, he wants to rid the world of hot sweaty feet by keeping what he calls his

“formula of critical factors4” (exhibit 6) that has distinguished Geox from the rest of the footwear

sector, both in Italy and abroad.


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II. THE COMMERCIALIZATION OF THE INNOVATION

TOWARDS A SUSTAINABLE COMPETITIVE ADVANTAGE

A theoretical framework

When we see a company outperform competitors in a given industry, it’s because it has created

a difference that it can maintain. The essence of strategy is exactly this: choosing a different

position within an industry, that involves a unique configuration of activities. The uniqueness of

such a configuration rests not only on which activities a company performs and how it

configures each of them, but also on how such activities relate to one another.

According to Camuffo, Furlan, Romana and Vinelli5, companies usually concentrate on

incremental innovation, on performance improvement via best practice benchmarking, on

introducing piecemeal change to optimize single activities, and on imitating rivals. But, as the

space gets increasingly crowded, prospects for profits and growth are reduced, especially for

newcomers. These behaviors are often evident in mature industries like textiles, apparel,

footwear, and eyewear, where the potential applications of new technologies are less valuable,

or, at least, less immediately straightforward.

Market definition: a Blue Ocean Strategy

In the Italian footwear industry, for decades, Italian companies -Ferragamo, Magli, Pollini,

Rossetti, Rossi, Tod’s- have successfully competed by carving out a strategic position

characterized by a market niche focus, fashion based reputation, continuous style innovation,

craft-like quality, and domestic production. But now, challenged by globalization as never

before, many of these companies have lost their edge or even experienced sharp declines in

profitability. Mitigation strategies have failed, including investment in brand and retail, defensive

strategies based either on clinging desperately to the Made in Italy label, or on moving

production abroad to reduce cost. These initiatives have rarely proven successful in the long

run, usually because they have not created a value difference for customers, and rather

produced “more of the same things”.


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What Mario Moretti Polegato achieved with GEOX is a partial redefinition of the footwear

market. GEOX changes the basis of competition: it is not only style that matters; it is also

comfort and healthiness. Instead of addressing only design and style issues, the new Italian

shoemaker decided to focus on technological innovation to get rid of sweaty feet. In Polegato’s

own words, GEOX is unique because “We are technology with Italian style.”

In that respect, we can analyze GEOX’s market definition by using the Blue Ocean framework

developed by Professors W. Chan Kim and Renée Mauborgne. Some factors of the industry

were eliminated, others were created; some were raised in comparison to the industry’s

standards and others were reduced.

Exhibit 7 gives a framework that describes which choices were made by GEOX to define a new

market segment in the footwear industry. The key element in GEOX’s market definition is the

elimination of traditional market segments. Convinced by the idea that “no one wants sweaty

feet”, Polegato decided to build a company that can serve all the market segments -children,

men, women and he is now trying to conquer the market of sports footwear-. The breathing

shoe-sole is a “platform technology” on which any kind of design can be sewed. Camuffo,

Furlan, Romano, Andrea Vinelli6 also illustrates GEOX’s blue ocean strategy by showing the

performance landscape where GEOX is in comparison to where its competitors are (Exhibit 8).

Eliminating traditional market segmentation makes it possible for GEOX to reach high

production volumes and therefore economies of scale as far as production is concerned -

especially production of the rubber sole’s membrane, which is the same in every pair of shoe

produced by GEOX). Returns on investment in production facilities and R&D spending are

higher because of the size of the customer base and the subsequent number of product lines

developed by GEOX. Economies of scale are also possible as far as marketing and

communication costs are concerned: GEOX chose to communicate solely on the basis of its

technological innovation so instead of having different communication campaigns depending on

the market segment, all products are advertised with one advertising campaign emphasizing the

importance of dry feet.


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Finally, the absence of segmentation also enables GEOX to have a flat price -and affordable

though not cheap: GEOX products are priced within the $120-$325 price range- for its shoes

in comparison of the rest of the industry: most shoemakers price their shoes depending on the

price range contingent on the target customer base, GEOX can price all its products on the

basis of the innovation they provide.

Because of those economies of scale and because of the trade off made between R&D and

style, GEOX can afford to spend a lot of money on R&D on the one hand and communication

and advertising on the other hand. R&D accounts for 3% of net sales, which is largely above the

industry’s standards and 10% of net sales are invested in communication and advertising to

increase brand awareness and recognition.

As far as its design strategy is concerned, GEOX adopted a “fast follower” attitude: GEOX

products do not set trends. On the contrary, designers at GEOX identify the fashionable trends

-thanks to Datamarket, a CRM tool that gives immediate feedback on customers’ tastes

regarding colors, styles, price- and decide on GEOX acquisition strategy depending on this

information. Since there is no real first mover advantage in the mature footwear market -at

least as far as product designs are concerned because products are easily reproducible- and

since GEOX’s competitive advantage lies in its technological innovation, GEOX lets other

players bear the risk of producing large volumes of products whose designs might not prove

successful. Therefore, the company capitalizes on the externalities deriving from the company’s

location among fashion trend setting industrial districts to produce small batch of potential

products that are pilot tested before production on the large scale is launched. Once successful

designs have been identified, GEOX’s flexible system enables the company to quickly put on the

market its new products on the shelves. In that respect, GEOX’s strategy is quite similar to

Zara’s one.

As far as production is concerned, GEOX developed a dual manufacturing system made of giant

manufacturing plants as well as a large number of small suppliers specializing in one or more

styles of the collection or in one task of the many manufacturing tasks (upper construction, sole

bonding…).


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Four large plants are in charge of producing volumes of undifferentiated parts -the rubber sole-

and are located in countries where the workforce is cheaper compared to Italian standards.

Having production concentrated in a few locations is key to reach production efficiency

(economies of scale) and confidentiality. Smaller suppliers work on the upper parts of the shoe

and on assembling the different parts.

Some of the manufacturing plants are outsourced and others are owned by GEOX. Reasons for

those choices will be detailed in the following paragraph. 80% of GEOX’s production is now

outsourced. Since production is not where GEOX gets its competitive advantage, it makes a lot

of sense for them to have contracts with suppliers and to devote their main resources on what

matters to them: technological development and marketing opportunities.

Value chain: leadership by necessity

GEOX’s value chain is similar to that of any manufacturing company (Exhibit 9). The difference

between a company like GEOX and any given shoe company is the fact the GEOX chose to

focus on elements that were not seen as crucial to be successful in the industry. The problem

with this blue ocean strategy was that few people recognized the genius of Polegato for coming

up with this new idea. It is only because he could not find any buyer that Polegato decided to

launch the company on his own in order to make the innovation comes true. His personal

wealth, inherited from his family which had been in the wine business for three generations and

had been making good money out of it, were essential in building the company. He had no

choice but to resort to his personal resources to develop the prototype and start

commercialization at first.

Though GEOX’s key strengths are technological leadership -R&D- and marketing and

communication skills, the company had to invest a lot to create an ecosystem that enabled

production and distribution of its products.

The construction of the ecosystem was facilitated by the company’s presence in Montebelluna,

an Italian region with a history of shoe manufacturing. Polegato’s personal wealth and

connections enabled him to get in touch with research facilities in the area -Universita di


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Padova and the ENEA-Italian National Agency for New Technologies, Energy and the

Environment- working on the topic of human body heat. Help from those research facilities

enabled Polegato to develop the first prototype of the breathing shoe, using a technology

developed by the NASA to let perspiration be evacuated whilst maintaining waterproof

qualities.

The first large production plant for rubber soles was fully owned in Romania to take advantage

of the cheaper workforce in Eastern Europe countries. Built in 1997 in Timisoara, the plant was

produces a third of the company’s total volumes. The overall investment exceeded 10 million

euros and the plant covers an area of about 25,000 square meters. Many Italian suppliers

specialized in assembly or cutting have reallocated part of their facilities next to GEOX’s plant

in Timisoara to ensure rapid restocking. As a result of GEOX’s presence, a “mini footwear

industrial district” has been created in Romania.

Since owning production facilities is not vital to GEOX’s business model, the company now

builds on its brand name to partner with other shoemaking companies to have access to

production facilities abroad. Thus, GEOX committed itself to the Aokang Group, a Chinese

company and a major player worldwide (second largest company in international design,

production and sales of “brown” shoes). The company owns over 30 subsidiaries and a retail

network of 2,000 franchise stores and sale outlets across China. The alliance between GEOX

and the Aokang Group gives to GEOX access to Aokang’s network as far as manufacturing and

distribution are concerned. In exchange for that, GEOX reallocated its R&D center in Asia

from Japan to China. The alliance is covered by a strict license enforcement system to prevent

GEOX’s technology to be imitated by Chinese manufacturers.

Finally, to build its production ecosystem, GEOX tied with a number of Italian and European

research centers and universities in order to ensure its technological expertise concerning

human body heat and therefore to maintain its heyday. Value capture is ensured by the number

of patents that GEOX places on its innovation. A total of 35 patents protect not only the

membrane used in the sole but also materials, processes (glue saving assembly processes and

sewing systems allowing improved shoe perspiration and flexibility), equipment and machinery -

for shoe sole molding and injection- used to produce GEOX’s shoes.


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GEOX’s strategy as far as distribution is concerned bears some similarities with its strategy for

production. It will be detailed in the next section addressing timing and choice of entry issues.

Timing and choice of entry: incremental moves to reach the market

GEOX’s distribution system is dual: on the one hand, a number of independent multi brand

shops distribution GEOX’s shoes along with shoes from other manufacturers -approximately

10,000 shops-; on the other hand, there is a number of single brand GEOX stores -940 stores

as of March 2009-. Among those 940 stores, 80% are franchised and 20% are owned by the

company and run like flagship stores located at the heart of the major cities -New York, Paris,

Roma, Beijing, and so forth-. Flagships stores usually display showrooms where product lines

are presented (Exhibit 4). This mix enabled GEOX to have a rapid access to a large scale

worldwide as well as to keep a close relationship with its customers in order to monitor their

preferences. This choice of entry was decided early on. As the company grew and its revenues

increased, more and more flagship stores were opened to contribute to CRM data collection

and to brand awareness.

GEOX’s strategy is characterized by the notion of progressive reach. The fact that there is no

real first mover advantage -the innovation is patented- backs this careful strategy. The company

targets a very large customer base -more or less everybody- but its strategy is that of a prudent

company which does not want to fall into the reach trap. As a result, GEOX progressively built

brand awareness in its domestic market before considering moving abroad. And the very first

step to built brand awareness was to address the market of children shoes before moving into

other segments of the market.

To build its knowledge of the shoe market, with which he was absolutely not familiar, Polegato

started by giving out for free prototypes of GEOX shoes to children from the Montebelluna

region. Approximately 5,000 children aged of 3 to 6 were given shoes that they were to try

before large production was launched. Choosing the children segment was not an accident:

children wear out their shoes quicker than adults, which made feedback all the more quick and

enabled GEOX to move along the learning curve rapidly. From a marketing point of view,

targeting children also enabled GEOX to increase its brand awareness among parents: when it


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comes to children footwear, the buyers are the parents and most parents went their children

to have shoes that are not only comfortable but also “healthy” -no parents want their children

to have deformed feet, most parents would be ready to pay a premium to ensure the

orthopedic development of their children’s feet-. Only when GEOX was famous enough in the

children market segment did the company move in the men market. Women were addressed

last because buying habits regarding footwear are more emotional for women that they are for

men -though the balance of the trade-off between fashion and comfort/healthiness is currently

changing-. To attract female consumers, GEOX had to develop its CRM expertise and to build

a production system flexible enough to make sure that the successful designs were indentified

and produced quickly enough to capture market share in the women footwear segment.

The same progressive strategy was used for international development. The company started to

establish its position in the Italian market before moving into neighboring European markets -

first Spain, France and Germany before moving to the UK and Poland-. GEOX does not move

into a new country before its position is consolidated with a significant market share through

third party distribution. Then the company builds its own retail network and starts attacking

the market leader by bringing out big guns as far as advertising and communication are

concerned. The company’s latest international moves include the USA and Asia -mainly China

and Japan-. Today, thanks to its careful expansion strategy, the company does business in 68

countries -foreign sales amount to 60%, which are realized mainly in Germany, France, Spain.

1GEOX Annual Report 2008. Section “Consolidated economic, financial, and operational

highlights”

2 The Sunday Times March 29, 2009; No sweat for the shoe maestro by Andrew Davidson

3 The Globe and Mail, May 25, 2009. Cool Innovation: The Sole of Italy by Carrie Cockburn

4 GEOX Annual Report 2008. Section “Critical Success Factors”

5 6 Breathing Shoes and Complementarities: How Geox has rejuvenated the footwear industry by

Arnaldo Camuffo, Andrea Furlan, Pietro Romano, and Andrea Vinelli.


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Exhibit 1 GEOX’s Mission and Corporate Values

To offer wellness by constant

development of new technologies at the

service of the general public in compliance

with interpersonal and corporate ethics.

Integrity

Dynamism

Realism

Honesty

Sobriety in

behavior

Respect

for others

Continuing

education

Sensitivity towards

environment


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Exhibit 2 GEOX’s Financial Results for FY 2008

Source: GEOX Annual Report 2008


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Exhibit 3 GEOX’s timeline 1989-2008

1989 From Moretti’s allergy to the sweaty feet to a business idea

Developed the first prototypes of a shoe with a holed rubber sole

Early

Tested its prototypes giving away for free the shoes to the children orphanages

1990s Developed the first line of shoes for children within a year

1995 Began to produce shoes for men and women

1999 Brought a solution that allows the hot air and humidity produced by the body to

vaporate

2000 Expands to international markets, starting in Europe

Geox laboratory created waterproof leather sole

2001 Launched its mono-brand points of sale

Established the Geox School to train employees

2004 Launched its successful IPO in the Milano Stock Exchange

2007 Sold in Dubai its line of transpiring military

2008 Faced a battle against well established shoe behemoths Adidas and Nike


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Exhibit 4 GEOX’s mono-brand stores


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Exhibit 5 Footwear industry in Europe

Shoe value of production, export and import in Europe.

Year Production Export Import Consumption

2002

900,535.00

214,348.00

1,232,914.00

1,919,101.00

2003

780,811.00

181,276.00

1,455,036.00

2,054,571.00

2004

728,211.00

170,085.00

1,709,875.00

2,268,001.00

2005

641,852.00

225,998.00

1,939,813.00

2,355,667.00

Source: Eurostat

Shoes importation flow in Europe in 2005

Country

Number of

Pairs Percentage

Growing rate

(2002-2005)

World 1939813 100.0% 57.3%

China 1250802 64.5% 171.1%

Vietnam 265271 13.7% -6.6%

Rumania 71467 3.7% 7.5%

India 52629 2.7% 45.9%

Indonesia 50772 2.6% -18.8%

Brazil 30978 1.6% 105.2%

Source: Eurostat


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Exhibit 6 GEOX’s critical success factors

Constant focus on the product with the application of innovative and

technological solutions developed by Geox and protected by patents.

Cross-market positioning for products, with a vast range of shoes for

men, women and children in the medium to medium/high price range

(family brand).

Strong recognition of the Geox brand thanks to an effective

communication strategy and its identification by the consumer with

the “breathing” concept

A growing presence on international markets thanks to easy

replication of a business model already tried and tested in Italy.

A network of mono brand Geox Shops in Italy and abroad which has

been developed according to each country’s distribution structure and

calibrated to the widespread network of multi brand clients.

A flexible delocalized business model with considerable outsourcing,

capable of efficiently managing the production and logistics cycle while

the Company maintains control over critical phases of the value chain,

so as to ensure product quality and timely deliveries.

Technology

Focus on

the

consumer

Brand

recognition

Internation

alization

Distribution

Supply

Chain


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Exhibit 7 GEOX’s Blue Ocean Strategy


24

Exhibit 8 GEOX’s position in the market

Source: Breathing Shoes and Complementarities: How Geox has rejuvenated the footwear

industry by Arnaldo Camuffo, Andrea Furlan, Pietro Romano, and Andrea Vinelli


25

Exhibit 9 Value Chain in Manufacturing industry


26

SOURCES OF INFORMATION

Magazines

Business: The Ferrari of Footwear; Italian Shoes, The Economist, March 13, 2004

Blessed Relief for Sweaty Feet; Ventilated shoes from Geox are winning fans -- and raking in

profits, Business Week,March 22, 2004

Flat-Footed, Forbes, November 29, 2004

Your Sole Provider, Newsweek, January, 10,2005.

Newspapers

Cool Innovation: The Sole of Italy by Carrie Cockburn (The Globe and Mail)

No sweat for the shoe maestro by Andrew Davidson (The Sunday Times)

Sole power: How Geox Changed the Footwear Industry by Julia Suppa (The Digital Journal -

http://www.digitaljournal.com/article/182707)

Management Articles

Breathing Shoes and Complementarities: How Geox has rejuvenated the footwear industry by

Arnaldo Camuffo, Andrea Furlan, Pietro Romano, and Andrea Vinelli. MIT

GEOX by Salvatore Sciascia.

Internet

GEOX website: http://www.geox.com/

GEOX Annual Report 2008

Video

http://factiva.everyzing.com/m/21600454/shoemaker-geox-runs-ahead.htm

http://www.digitaljournal.com/article/182707

http://www.geox.com/

http://factiva.everyzing.com/m/21600454/shoemaker-geox-runs-ahead.htm

Documents

Geox - Main Project