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Skullcandy

Founded in 2003 by Rick Alden, Skullcandy grew from a simple idea to a company with products distributed in approximately 80 countries and generating over $200 million in revenues annually. The company’s core prod- ucts, headphones with an extreme sport aesthetic, were sold in both specialty shops (e.g., skateboard, surf, and snowboard shops) and mass-market channels such as Target, Best Buy, college bookstores, and more, and its iconic skull logo was recognizable by its core youth market worldwide. Rather than the simplistic and streamlined ear buds that dominated the headphone category throughout the 1990s, many of Skullcandy’s designs had large ear cups with integrated amplifiers, akin to those worn by disc jockeys. As Alden notes, one of their first set of headphones, the Skullcrushers, pro-

vided sound that “rattles your head and bleeds through your eyes. It’s a damage-your-hearing kind of bass.”1 The headphones also came in bold colors and patterns (see Figure 1). Skullcandy had reinvented the head- phone category from a commodity-like product to one that was highly differentiated and branded, with dis- tinct designs that became as much about fashion and identity as functionality. As a result, Skullcandy head- phones commanded much higher prices, and greater brand loyalty than typical headphones.

After the company’s 2011 initial public offering, however, Skullcandy’s founder Rick Alden left the company to pursue other entrepreneurial ventures (starting, among other projects, the company Stance, which makes high-performance sports socks with unique designs). This worried the young company’s new stockholders. Furthermore, competitors began to eagerly imitate the Skullcandy strategy by develop- ing large-ear-cup headphones with bolder aesthetics and higher prices. Analysts began to wonder just how far Skullcandy could go.

Creating an aCtion SportS Brand

In 2001, veteran snowboarder Rick Alden was rid- ing up a ski lift and listening to music on an MP3 player when he heard his phone ringing, muffled in

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C-85Case 15 Skullcandy

the pocket of his ski jacket. He fumbled around with his gloved hands, trying to get to the phone before it stopped ringing, worrying that he would drop either his gloves or his phone into the snow 30 feet below. At that moment he thought, “Why not have headphones that connect to both a cell phone and an MP3 play- er?”2 In January 2002, he had his first prototype of a device called the “Link,” built by a Chinese manufac- turer. The device could plug into a cellphone and an MP3 player at the same time, and had a control switch on the cord with a microphone, a button that could switch between the phone and the MP3 player, and a volume control. The device was a hit. By January 2003, he had taken out two mortgages on his home to launch his company, Skullcandy, in Park City, Utah.3should include eight areas:

The history, development, and growth of the company over time

The nature of the external environment surrounding the company

The identification of the company s internal strengths and weaknesses, and whether it has sources of sustainable competitive advantage

A SWOT analysis

The kind of corporate-level strategy that the company is pursuing

The nature of the company s business-level strategy

The company s structure and control systems and how they match its strategy

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