L.A. Gear is a California corporation originally organized on February 7, 1979. The company is a holding company that through its principal subsidiary, L.A. Gear California, Inc., designs, develops, and markets a broad range of quality athletic and lifestyle footwear for adults and children (USSEC 10K, 1995, 4). The primary selling point, domestically and internationally, has been the concept of lifestyle, which in the beginning was more restricted to domestic niche markets. Had L.A. Gear stayed with its original marketing philosophy, a competitive return for the parent company may have come easier. Since 1990, a winning performance has eluded L.A. Gear. The intensity of the competition faced by L.A. Gear, as well as the rapid changes in fashion, technology and consumer preferences, conceivably led L.A. Gear away from its fashion focus and turned its attention on men's athletic shoes (Gellene, 1995, 1). With L.A. Gear's attention turned away from its market of origin, sales of the company's women's "work-out" style shoes fell 43% between 1992 and 1994 (Gellene, 1995, 1).
According to a report published in Sporting Goods Intelligence on December 9, 1994, Nike and Reebok collectively had over 50% of the United States' branded athletic footwear in 1994, while L.A. Gear ranked fourth with an approximate 5% domestic market share (USSEC 10K, 1995, 9). The domestic focus of the parent company seemingly had to shift to other strategies to ensure an eventual long range return. In the interim, while the company shifts market focus, it has continued to loose money each of the last four years, and the loses have continued into 1995 (see appendix)(Merrill Lynch, 1996, 6).
In an effort to broaden its base since its initial foray against footwear giants Reebok and Nike, L.A. Gear has expanded its distribution in the mass market by entering into a multi-year agreement with Wal-Mart to sell at least $240 million of merchandise. This wil...