Bsg Report Mio

8/10/2019 Bsg Report Mio

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THE COMPANY’S PRESENT STRATEGY AND HOW IT HAS

EVOLVED. WHICH IS THE COMPETITIVE ADVANTAGE OF YOUR

COMPANY

CUTE Shoes Company started and finished the BSG as an Integrated Cost

Leadership/Differentiation Strategy. At the beginning was a little difficult to choose the right

strategy for our company, we were indecisive and confused at the same time because we did

not know very well how the game worked.

Finally we opted for the integrated strategy because we thought it was the more appropriate

to a variety of models and keep a good quality in our shoes, since we never wanted that our

product had little scope and nor that it is sold at a high price either.

In year 11 CUTE Shoes Company offered shoes with a quality lower than the industry (S/Q 4)and also lower prices both in whole sale segment as in the Internet market, however this year

we were the second company that sold more in the whole sale segment and the first in the

internet market and the happened in the private label in each of the four regions. Due to the

great response we had, demand exceeded supply, so we lost about 250 pairs to sell that year.

Year 12 for CUTE Shoes went through several changes, we started to increase the quality (S/Q

6) and price both in the internet market as in the whole sale segment out because we realized

that we were not doing work our strategy from the beginning. At the end of the year we got

second place in market share in internet and we increase the market share in each of the

regions and this time we only lost 20 pairs to sell in Latin America. And we only sold private-

label segment in Asia Pacific. These changes got good results because our level of salesincreased and improved our credit rating and image rating.

In year 13 we bought a plant capacity for Latin America region due to the demand for shoes

that we had there. We decreased the price on internet market in $0, 50 in every region and

we kept the same price in whole sale segment for this year. We also kept in the same quality

and increase the numbers of models. At the end of the year we realized that we were the third

company that sold more in market share both in internet market as in whole segment.

Another important bounding was that year we lost about 80 pairs to sell maybe because we

just bought the plant and we had to wait a little longer for results, and we only sold private

label in North America and Asia.

In the year 14 CUTE Shoes decided to analyze how the Latin American market with the new

plant. We increased a little bit the price in the two markets and with the same quality as the

previous year (S/Q 6). This year we decided to reduce drastically the models of shoes from 300

to 100 because we had high demand and at the end of the year many shoes were left in

inventory. As a result our demand of shoes decreased at internet market but this year we had

no losses in Latin American market conversely we were the company that sold more in Latin

America and we got 4, 7 points than previous year.

The year 15 was maintained with slight changes in prices with a slight increase of the models

in both segments (Internet and Wholesale) after the decline of models previous years. We also

increase the quality one point more than previous year. We should emphasized that this yearwe were the second place in market share in Europe region and we were one of the two



companies that had not losses this year in Latin America, with 22.5% market share, actually we

were the company that sold more in that region.

In the year 16 there was an increase of the quality to 8 stars in all regions, also we increase the

price and the numbers of models. As a results we got the 17.9% of the market share in Europe

and the same result for in Latin America, we were the most we sold in those regions. Inaddition we got private label in every single region.

Year 17 was not good for us because we got a lot of sales losses which made us fall to 4 place

in the We increase the price and maintained the quality and the numbers of models. We got

the lowest percentage of market share in almost all regions at internet market segment. We

also got sales losses in all regions at whole sale segment except in North America due to out of

stock conditions. However we sold private label in all regions and as a result we got the 63.2%

of market share at least something good in all of these losses.

The year 18 was maintained with the same prices, quality and numbers of models in both

segments (Internet and Wholesale). This year we only got a sale loss in Europe region. We also

sold in private label for all the regions about 46% of market share, which kept us in fourth

place in the scoreboard. The same thing happened in the next year (19) we kept the prices,

quality and numbers of models in both segments but this year we lost of sell about one

hundred pairs of shoes in Latin America region and we also reduce the percentage in private

label to 16%.

For the last year (20) we decided to reduce the price in internet market from $83 to $80 and

we increase $0.50 in every single region of the whole sale segment keeping the quality and the

numbers of models. As a results we got too many sales losses in every region due to the huge

demand we had. We also loss market power in private label with an average about 10% in all

regions. Is necessary to say that we never hire a celebrity because every year we wanted tohire one, other company did it from there we never made the attempt again. Finally we went

up a place in the scoreboard, ranking third among all industries.

We can conclude that CUTE Shoes Company kept its marketing strategy from the beginning

which was our competitive advantage and it was able to win its place, capturing the loyalty of

the customers and offering a good quality in the market. In addition we can say that one of

our advantage was bought the plant capacity in Latin America region which helped us with the

demand and we always did a free shipping in every single year and we also can say that we

kept a good image and credit rating than the others companies.

DESCRIPTION OF:

1. CORPORATE CITIZENSHIP STRATEGY



CUTE Shoes has always being green oriented and we have constantly supported charities and

the environment. In year 19 we won first place of the Gold Star Award for Corporate

Citizenship and others years like 15, 16 and 20 we got the second place. We have given special

emphasis to the use of recycled boxing, energy efficiency initiatives, ethics

training/enforcement and workforce diversity.

2. PRODUCTION STRATEGY

Our production strategy is related to different factors taking into consideration that our

strategy is integrated cost leadership/differentiation.

a. Percentage of Superior Materials: since the first year we have increased the usage of

superior materials, over 60% in the Asian Pacific plant and the same amount for the

North America plant. The reason behind the increase was for raising the quality and

reaching 8 stars. Also because we realized it was cheaper to offer higher quality



through superior materials that any other factor, so for that reason in the last year we

got 80% for North America plant, 90% for Asia Pacific plant and 94% for Latin America

plant with an S/Q rating of branded pairs produced of 8 stars.

b. Number of Models: we initially started offering 200 shoes, we increased that number

to 300 until year 13 in which we reduced the amount to 100 due to got too many

demand in the market, later on in year 16 we started to increase the models to 150 in

North and Latin America region keeping Asia region with 100 different models until

the end of the game.

c. Enhanced Styling features: since we already use a lot of superior materials, we

managed to reduce this factor since it is the most expensive one, in this way we could

reduce the cost of each pair.

d. TQM/Six Sigma Quality Program: we are currently spending $0.50 in North America,

$1.40 in Asia Pacific and $1.4 in Latin America region per shoe; we have had to

continuously spend each year a bit more in order to increase the quality of our shoes.

e. S/Q Rating of Branded Pairs Produced: we started with a low-regular quality of 4

stars; we have worked our way to 8, an improvement of 50% always following what

our strategy was, no much models no much expensive with a good quality.

f. Compensation and Training: Training our workers has been a good investment that

has help us reduce the number of rejects, we have kept on spending in best practices

training and incentives, since it has truly shown to be a way of reducing the cost.

g. Number of pairs to be manufactured: We have increased the number of

manufactured shoes; we initiated a construction in the plant of Latin America region in

year 12 and 13 to sell 1000 more shoes. The reason of constructing in the same plant

and not going to a different region was to use economies of scale, in this way we

reduced costs and the demand.

3. MARKETING STRATEGY (INCLUDING CELEBRITIES)

Our marketing strategy was to be above the average of the industry being truthful to our

integrated cost leadership/differentiation strategy. As we mentioned before we increase the

S/Q rating of our shoes reaching an 8 stars, the augmentation was done in a slow way in order

to test the market.

a.

Celebrities: We always wanted to sign a contract with a celebrity to help us with thesales level but we never could get them, perhaps because we never did a good



proposal of bid or something like that, instead of that, we invested so much in

advertisement every year from $7000 to $18000.

b.

Wholesale Price to Retailers: Our process of taking price related decisions was always

taking in consideration the Competitive Intelligence Report, specifically the market

snapshot. Since we realize it was better to do reports each year to better control the

competitor decisions. Our objective was to be above the industry average, but at thesame time controlling the gap with the prices of competitors.

c. Advertising Budget: Our advertising strategy was also done studying the reports and

trying to be above the average, we did emphasis where we needed to sell more shoes.

We invested so much in advertisement every year from $7000 to $18000.

d. Rebate offer: Our rebate offer was a constant of $3 because this boosted our image,

except in year 15 we increased it due to the offer of the competitors. We also were

taking price related decisions was always taking in consideration the Competitive

Intelligence Reports.

e. Retailer Support: Our retailer support was distributed as follows: in North America

and Europe region at the beginning we got $400 but then in year 15 we increased it to$800, in Asia pacific region we were from $400 to $600 and finally for the Latin

America region we got at the beginning $400 and in year 15 we change it to $500

since we had extra shoes that we needed to sell.

f. Delivery to Retailers: from year 11 to year 15 we maintained a 2 weeks policy because

we thought it was important for customers to find our shoes available when they

wanted it, but due to the competition we changed it to only one week since year 16 to

the end of the game.

4. WHOLESALE STRATEGY

We had an integrated cost leadership/differentiation strategy so we tried to achieve global

efficiency having no much models being no much expensive and always keeping a good quality

at the beginning we only got two plants one in North America and another one in Asia Pacific

and then we caught the Latin American market building a new plant and managing it with

almost 22% of the market, at the same time we wanted to be able to respond locally, we were

able to respond to changing environments specially when the currency change affected the

industry, in this situations we were able to adapt and increase our sales.



The integrated strategy allows adapt quickly to environment changes and effectively leverage

its core competencies while competing against its rivals and that was what we did first we

managed having to focus in only two plants then the new one in Latin America, second we did

it offering different type of advertising and prices depending on each region.

Our integrated strategy has proven to be quite successful; we have invested in quality andkeep above the competition in all the different indicators like price, S/Q rating, advertisement,

etc. Each year we studied the reports we learned more about the competitors, we got to know

the market and took the decisions. We’ve been able to reduce costs thanks to the distribution

that was done considering the exchange rate cost adjustments for each year and also the

tariffs on pairs imported.

5. INTERNET STRATEGY

Our internet strategy was trying to keep the prices a little below the competition and also we

didn’t sell too many models, since this market wasn’t a main concern for us. But in general we

increased about $5 in the price in the whole years of the game also the quality from 5 to 8

stars, we always had a free shipping and with the same amount of advertisement from

wholesale segment. At the end we realized that we increased our level of online orders about60%.

6. PRIVATE LABEL STRATEGY

We did private label in every single region but in different ways mainly we adapted it to the

changes of the industry and the market. For North America region we did private label in all

years except in year 12, with an average sales of $31.55 and our position of the market share

was about 25%. In Europa region we did private label in year 16 to year 20 with an average

sales of $36 and our position of the market share was about 43%, this was the best region in

private label. For Asia Pacific region we did private label in all years with an average sales of$35 and 32% of market share. Finally for Latin America region we did private label from year



14 to the end of the game and we got an average sales of $35 with about 22% of market share,

this region got the least involvement on the market.

PERFORMANCE TARGETS FOR THE NEXT YEAR OR TWO,

ASSUMING THE SIMULATION CONTINUED ON.

PERFORMANCE TARGETS Year 21 Year 22

Earnings Per Share (EPS) $4,30 $4,58

Return On Equity (ROE) 7,6% 8,3%

Stock Price $46 $47

Credit Rating A+ A+

Image Rating 77 79

These targets are based on the market situation considering also any problems within theindustry like the exchange rates situation since we did a strategic plan so we put those

knowledge already got in this situation and we hope to maintain our marks or improve them,

we considered the results of year 20 and we also played to see what would happen with our

new decisions.

Documents

Bsg Report Mio