Great American Knitting Mills

Provide a synopsis of the situation and the decisions that Great American Knitting Mills has to make.

The Great American Knitting Mills, which got benefits from the long time success with its highly desirable brand Gold Toe, had taken on the task of producing, selling and distributing a new brand of sock Arrow. Arrow has an established t-shirt brand and left Great American to handle the sock line. Gold Toe is a premium brand that is offered in high-end retail locations, with exclusive distribution deals in each market. Due to the exclusivity of the Gold Toe brand there was a demand from retailers who did not carry the brand and were interested in carrying Gold Toe, however due to the nature of the exclusivity agreements that was not possible. This is where Arrow came in and was offered to the second largest retailer in each market, a simple fix seeing that Arrow socks were almost identical to the Gold Toe brand.

The problem was that Gold Toe did not help to promote Arrow whose socks were not recognized by consumers. The consumers bought the Arrow socks and felt upset. Also, the retail associates did not take great interests in learning about another new brand that just came in because of more works for them. Lacking market efforts and sales efforts, Arrow socks sales were stagnate, so Great America needed to come up with marketing strategies in order to help this new brand get profits.

In examining its financial performance and market dynamics, what can you say about its current profitability? Its future profitability? Provide support for your answers.

One of their largest competitors, Burlington, had three to four times lower than Gold Toe, Gold Toe has established premium brand equity through significant brand awareness and perceived quality, and at the time of this case study, was very profitable. Consistently growth over the years and substantial growth in 1980 reaching $17 Million in sales had no signs to be slow down. The amount of sales within department stores for Gold Toe had steadily grown and was showing promise of increasing over the years to come as well. Their distribution model allows them to keep their selling costs low by limiting market research and administrative costs associated with assisting retailers stocking Gold Toe socks. Retailers were willing to allow for less attentive service because the Gold Toe brand was so strong and they were given exclusivity to sell that brand. Therefore, Gold Toe led Great American have a gross margin of about 33% with 1981 revenues of about $20 million. Growth in the sock industry was excepted as athletic socks were becoming more fashionable and Gold Toe was expected to take part in that growth. With fewer and fewer competitors in a fragmented marketplace and the per capita consumption increasing, this leaves Gold Toe in a position where they can capitalize on the growth opportunity being presented in an expanding marketplace.

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