ATHLETIC FOOTWEAR   

RAW MATERIALS: WHERE DOES IT ALL COME FROM?

            After the shoe has gone through the design process, the first step in the supply chain is gathering all the necessary materials used in production.  The manufacturing procedure starts at the very beginning with raw materials. These basic components are needed to make different parts of the shoe such as rubber soles, canvas products, or uppers, which are then cut and put together at an assembly plant.

The basic raw materials used to manufacture athletic footwear are:

RUBBER

COTTON

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THE RUBBER INDUSTRY

            The rubber industry provides the basic material for making the rubber soles used in producing athletic footwear. It is a vertical industry dominated by a small number of large firms. The majority of consumption occurs in more developed counties like the United States and Europe. Trends show a movement towards production in developing countries may occur in the future.

What products are produced from this industry?

TABLE 1: US Rubber industry End Products

Source: Rubber World September 1999

The table above reveals that the footwear industry is not a major part of the rubber industry. The majority of the rubber consumption goes towards tires, and rubber sole production only accounts for 1% of the total production of rubber. 

Where does the rubber used to make soles come from?

  natural rubber

	makes up 40% of the demand for rubber. Natural rubber is more elastic and considered better quality than synthetic rubber so it is preferred in the making of rubber soles.
	It is produced mainly in Southeast Asia. The major producing countries are Malaysia, Indonesia, and Thailand.

Where is the majority of the consumption coming from?

     NORTH AMERICA, WESTERN EUROPE, and JAPAN   accounted for 53% of global rubber consumption in 1993.

Will these countries continue to play a major role in consumption?

Regional Patterns: Analysts expect that these developed regions will suffer from over capacity, intense price competition, and low production rates. Thus, the rubber consumption will shift to less developed regions because factories will be able to operate at lower costs. Although North America, Western Europe, and Japan will still account for a majority of the rubber consumption, other industrializing countries such in Asia and South America -- namely South Korea, China, Brazil, and Mexico -- will also gain a role in the industry.

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THE NON-TIRE MARKET

Total value of the market : 32 billion dollars

What are the barriers to entry?                            

           **** high concentration, slow growth in global sales, immense capital requirements, production technology, and research and development facilities.

The rubber manufacturing companies benefit from high barriers to entry. There are very few competitors in the industry and the majority of the industry is dominated by vertically integrated large global production companies.

Who are the industry leaders for non-tire rubber manufacturing?

	5% -- Goodyear in the United States
	4% -- Continental in Europe
	7% -- BTR in the United Kingdom
	8% -- Bridgestone in Japan
	4% -- Hutchinson

CLICK FOR CHART ON THE INDUSTRY LEADER'S PERCENTAGE OF THE NON-TIRE MARKET.

Together, these 5 companies hold 28% of the market share. If you take the top 10 suppliers then they account for around 42% of the non-tire rubber sales.

In the late 1980s, the non-tire rubber industry became more vertically integrated when large globally dominant companies started buying up acquisitions in other countries -- i.e. Japan purchased Firestone, Germany bought General Tire, etc. These companies wanted economies of scale as well as a stronger presence in the consumption market.

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