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FOOT LOCKER - SCENERIO ANALYSIS

In early 2000, Foot Locker was thinking to change its strategy. They were rethinking of their companys retail mix for shoe. Main Aim of Foot Locker is to maximize profit. In year 2002, company started to stock more lower price foot wear. Company had reduced its inventory of sneakers priced at $120 by 50%.

FOOT LOCKER - IDENTIFICATION OF PROBLEM


Q.1). Analyze these data and discuss the business implication for Foot Locker.
Price Category
Less than $30 $30 Less than $40 $40 Less than $50 $50 Less than $60 $60 Less than $70 $70 Less than $80 $80 Less than $90 $90 Less than $100

2000
115 38 37 30 22 21 11 17

2006
126 40 35 27 20 20 11 18

FOOT LOCKER - SOLUTION


STEP 1: The Hypothesis Follows: . Ho : Sales of the year 2000 and 2006 is independent of each other. Ha : Sales of the year 2000 and 2006 is not independent of each other. STEP 2 : The appropriate statistical test is ( Chi Square Goodness Of fit test of Independence

Where :

: Frequency of observed values : Frequency of expected values

STEP 3 : Using = .01 Degree of Freedom = (r-1)(c-1) Where r = number of rows c = number of columns

FOOT LOCKER - SOLUTION


As mentioned in Step 3, calculating the critical value for Chi Square for = 0.01

Here df = ( 8-1)(2-1) = 7 = 18.4753

Price Category

2000

2006

Less than $30

115 (119.27) 38 (38.60) 37 (35.63) 30 (28.21) 22 (20.79) 21 (20.29) 11 (10.89) 17 (17.32) 291

126 (121.73) 40 (39.40) 35 (36.37) 27 (28.79) 20 (21.21) 20 (20.71) 11 (11.11) 18 (17.68) 297

241 78 72 57 42 41 22 35 588

Now, Calculating

with the help of

$30 Less than $40 $40 Less than $50 $50 Less than $60 $60 Less than $70

By using Chi- Square formula calculating = 0.85 ACTION: The observed critical value of

value of 0.85 is smaller than the


$70 Less than $80

= 18.4753, so the
$80 Less than $90 $90 Less than $100

decision is to not to reject null hypothesis.

FOOT LOCKER - BUSINESS IMPLICATIONS


. Because there is no significance difference between the sales of Foot Locker in the years 2000 and 2006, we can interpret that the strategy to stock more lower price footwear doesnt result is significant profit maximization for Foot Locker .

FOOT LOCKER - IDENTIFICATION OF PROBLEM


Q.2). Suppose Foot Locker encourages its employees to make formal suggestions for improvement. Suggestions record were kept under different under category like employee sex, geographic location as Sex shown.
Male Female 43 20 61 25 32 29

Find out if there is any relation ship between the sex of the employee and geographic Location location in terms of no. suggestions?

U.S. West U.S. South U. S. East U. S. North Europe Australia

29 48 52 28 78 47

FOOT LOCKER - SOLUTION


STEP 1: The Hypothesis Follows: . Ho : Relation between the sex of employee and geographic location are independent to each other. Ha : Relation between the sex of employee and geographic location are not independent to each other. STEP 2 : The appropriate statistical test is Chi Square Goodness Of fit test of Independence

Where :

: Frequency of observed values : Frequency of expected values

STEP 3 : Using = .01 Degree of Freedom = (r-1)(c-1) Where r = number of rows c = number of columns

FOOT LOCKER - SOLUTION


As mentioned in Step 3, calculating the critical value for Chi Square for = 0.01

Here df = ( 6-1)(2-1) = 5 = 15.0863 U.S. West : U.S. South U. S. East U. S. North Europe Australia 29 (41.27) 48 (38.98) 52 (64.77) 28 (30.38) 78 (63.05) 47 (43.56)
282

SEX

43 (30.73) 20 (29.02) 61 (48.23) 25 (22.62) 32 (46.95) 29 (32.44)


210

72 68 113 53 110 76 492

Now, Calculating

with the help of

By using Chi- Square formula calculating = 28.72 ACTION: The observed critical value of

value of 28.72 is larger than the = 18.4753, so the

decision is reject null hypothesis.

FOOT LOCKER - BUSINESS IMPLICATIONS


. By seeing the analysis result, we can say that relation between the sex of employee and geographic location are not independent to each other.

FOOT LOCKER - IDENTIFICATION OF PROBLEM


Q.3). According to Well Fargo Securities and the NPDF world consumer panel, Foot Locker holds 19.4% of the sneaker market. Due to the presence of Nike in U.S. West and its relationship with Foot Locker, they believe that they good market share in that region. To prove this they hire market research company. The company randomly selected 1,000 people who purchased sneakers in the U.S. West, out of which 230 of sample shopper purchased from Foot Locker. Is this result enough in the U.S. West to declare that FLs share is significantly higher than its otherwise?

FOOT LOCKER - SOLUTION


STEP 1: The Hypothesis Follows: . Ho : p = 0.194. Ha : p 0.194. STEP 2 : The appropriate statistical test is ( Chi Square Goodness Of fit test of Independence

Where :

: Frequency of observed values : Frequency of expected values

STEP 3 : Using = .01 Degree of Freedom = (k-1) Where k = number of category

FOOT LOCKER - SOLUTION


By using chi- square goodness of fit test, we view it as two category 1). Expected distribution in which we expect 0.194 as Foot Locker market share and 0.806 as not a market share for Foot Locker in U.S. West. 2). Observed category are 230 as Foot Locker market share and 1000 230 = 770 as not a market share for Foot Locker in U. S. West. Using the total observed item, determining the expected distribution as 0.194* 1000 = 194 and 0.804*1000 = 804 So. observed and expected frequency are as under:

Market share Non Market share

230 770

194 804

Now, at Alpha = 0.01 and taking two- tailed test into consideration, so /2 = 0.005 and df = 1 The critical table value of chi square is = 7.8797

FOOT LOCKER - SOLUTION


Now using the chi-square formula, the calculated value is :

= 6.68 + 1.43 = 8.11

Here the observed value of chi square 8.11, is greater than the critical value i.e., = 7.8797. Therefore the decision is to reject the null hypothesis.

FOOT LOCKER - BUSINESS IMPLICATIONS


By seeing the analysis result, we can say the Foot locker belief that it has higher market share in the U.S. West as compared to the rest of the region stands true. By seeing the significant growth in U.S. West, we can suggest that Foot Locker should try to established partnership with renowned footwear brands like Nike in other region of the country also.

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