Mini Case:

TOMS Shoes: Expanding Its Successful One-For-One Business Model?

Disclaimer: This case study is the original work of the author and does not cons8tute plagiarism or the
use of any unauthorized external sources. It is intended for educa8onal and illustra8ve purposes.

Ques&ons:

1. What particular generic competitive strategy does TOMS shoes employ, and what are the
fundamental components of their strategy?

2. Perform a financial evaluation and SWOT analysis for TOMS shoes.

3. What are the TOMS Shoes' key issues?

4. What recommendations would you give TOMS Shoes to boost its competitive edge in the shoe
industry, while addressing their main issues?
Answer 1:
TOMS Shoes employs the business strategy of "Focused Differen=a=on" within the Generic Compe==ve
Strategies framework. Here's a detailed breakdown of the key elements of their strategy:
Unique Business Model:
TOMS' standout feature is its "One for One" business model, where for every pair of shoes sold, a pair is
donated. This is evident from their impressive track record of dona=ng millions of shoes to individuals in
need globally.
Impac8ul Social Targe<ng:
The company has focused on engaging a dis=nct consumer segment deeply involved in social causes.
Expanding their giving, TOMS extends beyond shoes to provide eyewear, coffee, and bags. The impact is
demonstrated through ac=ons like restoring sight for nearly 800,000 individuals across 14 countries.
Narra<ve-Driven Marke<ng:
The narra=ve emphasized by TOMS is about building a world where each purchase serves a greater good.
The success of this strategy is visible through heart-warming stories showcasing individual impact due to
TOMS' dona=ons. You can look at their compe==ve advantage in Exhibit 2 from the case, where their
“Followers” per mil. of $ in revenue is 2659, more than twice that of a brand as big as Nike (1135).
Diversifica<on of Charitable Offerings:
By branching out into products like eyewear, coffee, and bags, TOMS solidifies its brand's associa=on with
social contribu=on. This strategy effec=vely supports mul=ple causes, from providing clean water to
suppor=ng safe birth services.
Brand Image Aligned with Generosity:
TOMS has cul=vated a brand iden=ty closely =ed to benevolence. They've built a reputa=on beyond selling
shoes; they are renowned for promo=ng goodwill. A shining example is their Impact Grant program, which
has awarded $6.5 million to 14 Giving Partners involved in global issues such as gun violence and mental
health.

Answer 2:
TOMS Shoes holds strengths in its renowned One-for-One model that aids social causes. However, it
grapples with weaknesses related to the high cost of produc=on. Opportuni=es arise from diversifying its
product range, yet it faces threats due to financial instability from significant debts and increased market
compe==on.

Over a decade, TOMS Shoes recorded phenomenal financial growth, averaging a remarkable 145% annual
revenue increase. For instance, from 2006 to 2016, their revenue surged from $0.2 million to $416 million,
showcasing exponen=al expansion (Exhibit 4). They diversified beyond shoes, introducing eyewear, coffee,

and bags, broadening their charitable efforts into vision restora=on, clean water ini=a=ves, and safe
birthing services.
However, recent challenges arose as their earnings declined from 2017 to 2019, leading to significant debt
accumula=on. This financial strain resulted in a restructuring deal where creditors took over ownership
from Bain Capital just before the COVID-19 outbreak, providing crucial relief.
The company’s response to the pandemic and the effec=veness of their diversifica=on, such as expanding
into unrelated businesses like coffee roas=ng, pose pivotal ques=ons for the sustainability of their iconic
One-for-One business model amidst changing market dynamics.
Answer 3:
Here are five key issues for TOMS Shoes:
Market Sustainability Challenges:
The business model of dona=ng a product for each one sold is cost-intensive. Although this aligns with their
Focused Differen=a=on Strategy, it creates financial challenges, as demonstrated by the es=mated $41 cost
to produce and donate each pair of $50 shoes. This cost structure could threaten the long-term financial
sustainability of the company.
External Market Compe<<on:
The retail sector faced a downturn, further complicated by new compe=tors entering the market. This issue
connects to TOMS' strategy, as the model built around the goodwill of consumers could be challenged by
compe=tors offering similar social missions but possibly with more sustainable financial models.
Diversifica<on and Brand Focus:
Diversifying into products like eyewear, coffee, and bags might dilute the brand's original focus on footwear.
While it expands its charitable offerings, it deviates from the core shoe product line. The case suggests the
ques=on of whether diversifying too far could impact brand iden=ty and market posi=on.
Response to Changing Consumer Behaviour:
The digital revolu=on and evolving consumer behaviour influenced market trends. With TOMS primarily
focusing on the One-for-One model and its associated narra=ve, a shij in consumer percep=ons or values
could challenge their approach.
Economic Impact of the COVID-19 Pandemic:
The pandemic triggered a recession, impac=ng TOMS' market and sales further. Although the Focused
Differen=a=on Strategy aligned with the brand's social responsibility, the economic crisis intensified
challenges, with declining sales and partnerships, pukng addi=onal stress on their financial sustainability.

Answer 4:
Financial Balance: Leveraging the differen=a=on strategy, TOMS can strategically market its high-end
products using its impact stories. For instance, for their more expensive lines that retail upwards of $150,
emphasizing the impact made on communi=es can jus=fy the premium prices. Detailed stories, quan=fying
the impact created through sales, would reinforce the higher price points. This strategy aligns with their
core approach of diversifica6on and differen6a6on.
Bigger Compe<<on: Expanding its online presence with compelling narra6ves and transparent data can
help dis=nguish TOMS in the crowded market. U=lizing interac=ve websites or social media campaigns to
vividly illustrate the impact created through their "One-for-One" model, such as the vision restora=on
program or clean water ini=a=ves, would set them apart. This approach maintains the company's
differen=a=on strategy and creates an emo=onal bond with consumers, even in a digital sekng.
Adding More Stuff: As TOMS diversifies into different product lines like coffee and bags, aligning these
items closely with their philanthropic causes ensures a consistent brand message. A pound of TOMS
Roas=ng Co. Coffee, equa=ng to 140 litres of safe water given for each pound sold, supports the company’s
diversifica=on strategy while maintaining a strong link to its core giving model. Similarly, for bags, the focus
on suppor=ng safe birth services is an example of how new products align with their primary mission.
Changing Shopping Habits: Focusing on online marke6ng campaigns that emphasize TOMS' unique giving
model can help sustain personal connec=on even in the digital realm. By tailoring online content with
engaging stories of impact and involving customers in the giving process, TOMS maintains a strong
customer connec=on. Leveraging consumer-generated content can also reinforce this strategy, maintaining
their core focus even in changing shopping trends.
COVID-19's Impact: U=lizing online channels to reach consumers during the pandemic aligns with their
focused strategy. Emphasizing their impact stories through digital marke=ng, especially during the =me of
recession, would be cri=cal. The strategy involves focusing on stories of aid and global support while
leveraging partnerships that reflect a similar commitment. With the impact of COVID-19 on retail, effec=ve
financial planning is crucial to maintain focus during these uncertain periods.