Case Study: TOM’S One for One Business Model: Is it Sustainable for the Future?
What is TOMS’s target market? How might this market change in the future?
TOMS’s target market is consumers who resonate with TOMS one for one approach and the company’s combined for-profit/philanthropic persona. This market may change if TOMS undergoes a PR crisis. They need to be concerned if publicity is given to their manufacturing facilities in China, their undercutting of sustainable change in impoverished countries by not providing microfinancing and TOMS stymieing local entrepreneurship in Argentina and Ethiopia by providing free shoes. If people are no longer gaining from their sustainable model, people may be less likely to pay the additional costs to their shoes.
What revenue streams does TOMS have that support how the firm competes? How sustainable are these revenue streams?
They have four revenue streams. Product sales which include shoes, eyewear, and coffee. TOMS branded products (t-shirts, sweatshirts, caps, and TOMS flags). Miscellaneous items available via TOMS Marketplace, including accessories, home and bath products, and a small number of tech products. All sales trigger a commensurate gift to people in need. TOMS charges a top price with a large margin to be able to have a one to one offering. It may continue to be sustainable since they do not have to collect donations. Primary threat is the criticisms they receive and people continuing to pay a premium for their products. Whether their one on one movement will continue to resonate with their partners and volunteers is debatable.
What key assets does TOMS possess and how sustainable are those assets?
Toms’s key assets are Blake Mycoskie, Corporate culture, relationships with nonprofits that help TOMS distribute products to children and people in need, TOMS volunteers, interns (that work in TOMS facilities), Campus clubs, and Day without Shoes campaign. Much of their key assets depends upon their leadership and making sure they remain in place with their current vision.
What are the major challenges TOMS faces as the firm continues implementing its business model as a means of reaching its mission? Which of these challenges is the most serious and why?
No company has attempted to scale a one to one business model to the extent that TOMS is contemplating. They have grown fast and expanded very rapidly. Can they sustain it and keep their volunteers, partners, and investors happy? They have a dual challenge of managing a global supply chain while at the same time leading a worldwide philanthropic effort. Will people continue to pay a premium for their products for their one to one plan? Will a PR crisis wreck their reputation? We shall see.