BSG

PumKash

India Ali, Tamira Conner, Alyssa Moore, Nenna Olu, Stacy-Ann Telfer

Strategy

Implemented Best Cost Strategy to achieve our company vision and also aim to stay above or maintain investor expectation in terms of earnings per share, return on equity, stock price, credit rating or image rating within this footwear industry. PumKash provides low-cost quality products with a focused strategy aimed at gaining sales and market share in a particular geographic region. Our main competitive efforts were focused in North America, with plants operating in Asia-Pacific and Latin America.

In order to implement the Best Cost Strategy strategy it was important for us to reach out to large number of customers. Thus, we decided to make optimum use of all our retail outlets in order to spread out our product to a larger consumer base.  However, we focused too much on best cost was unable to offer more models to our consumers. Initially, we were above industry average with the number of models being offered , however in Year 14 we feel behind considerably and did not increase our models until Year 18 and we were still at least 8% below industry average.

Wholesale Segment

Maintain the lowest price in the industry overall to retain market share. Maintain 15% or more market share in North America, Asia/Pacific, and Latin America each year. Maintain highest celebrity appeal in target regions. Remain top three in advertising expenses.

11 12 13 14 15 16 17 18 $46.00 $48.00 $50.00 $52.00 $54.00 $56.00 $58.00

PumKash Price vs. Industry

Industry AveragePumKash

11 12 13 14 15 16 17 180%5%

10%15%20%25%

PumKash Mkt. vs. Industry

PumKashIndustry

Years

(%)

Internet

Maintain internet market share at 20% or higher. Stay price competitive relative to industry staying at a reasonable lower price than competitors. Pass certain costs to our consumers whenever possible (free shipping).

Private Label

Our main geographic region was North America; we did not enter Latin America until Year 15. Since our primary focus was the branded footwear we did not have a strategy to obtain market share in the private label segments thus our market share was lower compared to our competitors until the later years.

Production Strategy and Workforce Compensation

Our main goals of our production strategy were to upgrade facility capacity, reduce reject rate, and decrease operation costs. We concentrated most of our production in the most cost effective regions – North America and Asia-Pacific and Latin America. By focusing our capacity in the appropriate regions we were able to meet expected demand. A part of our strategy was to upgrade facilities and resources as often as finances allow, unfortunately we only upgraded one plant at Option A, when we should have upgraded all plants early on to reap the benefits of cost savings later on. We also used the lowest amount of superior materials possible without sacrificing our SQ rating. We maintained a balance between workers incentive pay and base wage changes with that of the industry average. Additionally, we pursued six sigma and best practices only to increase productivity without sacrificing our profit margin. However, had we spent more on these practices early on the benefits of cost savings would have occurred in the later years.

Pairs ProducedYear

11Year

12Year

13Year

14Year 15*

Year 16

Year 17

Year 18

Year 19

NA

1871 2288 2342 2937 2937 2937 2937 4106 4106

EAAP

3145 4420 4608 4622 4622 4617 4617 4608 4608

LA

2046 2046 2046 2036 2036

Number of Workers EmployedYear

11Year

12Year

13Year

14Year 15

Year 16

Year 17

Year 18

Year 19

NA

488 495 492 606 601 596 596 597 840

EAAP

1342 1619 1604 1648 1648 1652 1678 1764 1764

LA

697 675 681 675 664

Productivity NA AP LA

Year 11 3.83 2.34

Year 12 4.62 2.73

Year 13 4.76 2.87

Year 14 4.85 2.80

Year 15 4.89 2.80 2.94

Year 16 4.93 2.79 3.03

Year 17 4.93 2.75 3.00

Year 18 6.88 2.61 3.02

Year 19 4.89 2.61 3.07

Finance Strategy

PumKash wanted to keep outside financing minimal, thus we raised a lot of money and any additional capacity that was purchased was through use of our own funds. Our strategy was to increase profitability, increase net revenues, and maximize stock prices.

PumKash maintained a positive cash flow and was able to increase financial position every year except the Year of 14, the cash flow decrease because of the purchase of new capacity in Latin America.

We overlooked a dividend strategy causing us to miss out on financial opportunities. . However, if we were to issue dividends we would have issued them starting at $1.00 beginning in year 13 and increase the payout by $1.00 every year as dividends help to increase image and return on equity.

We maintained an “A+” credit rating by maintain healthy debt-to-asset ratio, interest coverage ratio, and default risk ratio.

We always applied a pricing strategy below the average of industry price in order to capture market share. We consistently maintained a price of at most 10% below industry average in internet and wholesale segments.

We found the market shares in Private Label Segment were not reasonable achieved in the first

1 2 3 4 5 6 7 8 90.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

3.834.62 4.76 4.85 4.89 4.93 4.93

6.88

4.89

2.34 2.73 2.87 2.80 2.80 2.79 2.75 2.61 2.612.94 3.03 3.00 3.02 3.07

Productivity

North AmericaAsia-PacificLatin America

Years

Year Cash on Hand ($000s)11 19,24412 33,80313 59,36414 30,36915 96,45716 173,41417 224,06318 314,484

few years, therefore we immediately shifted our key focus to internet and wholesale segments then turned our attention back to the private label segment in later years.

We initially believed that investing into advertising would boost our sales volume in the early years we maintained expenses of at least 15% above industry average. Later, we did not make any changes nor did we allocate more funds to our advertising budget and we fell below industry average which correlated with our reduced amount of market share. 

Financials

Debt to Equity Ratio*

Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18

0.55 0.38 0.24 0.15 0.11 0.04 0.04 0.04

Competition

North America

Private Label Wholesale Internet

Year Competition Mkt.Sh. PriceMkt.Sh

.Price Mkt.Sh. Price

11

PumKash 24.50% $

43.0014% $ 50.00 21.40% $ 65.00

Ballerz 17.40% $

33.0014.90% $ 46.00 13.90% $ 70.00

D C Shoes 0% $

70.0015.90% $ 62.00 15.90% $ 79.00

12

PumKash 8.70% $

35.0017.90% $ 50.00 24.80% $ 65.00

Ballerz 20% $

35.0016.10% $ 53.00 12.90% $ 70.00

D C Shoes 17.40% $

45.0013.40% $ 62.00 14.80% $ 73.00

13

PumKash 8.20% $

35.0021.40% $ 50.00 21% $ 65.00

Ballerz 21.40% $

36.0015.50% $ 56.00 12.10% $ 75.00

D C Shoes 0.00% $

45.009% $ 62.00 11.50% $ 72.00

14

PumKash 10.20% $

35.0020.30% $ 50.00 23% $ 65.00

Ballerz 17.20% $

36.0013.90% $ 58.00 11.60% $ 77.00

D C Shoes 51.10% $

32.007% $ 58.00 9.50% $ 68.00

15

PumKash 26% $

35.0020.20% $ 50.00 22.50% $ 65.00

Ballerz 17.50% $

36.0012.10% $ 59.00 9.50% $ 80.00

D C Shoes 15.20% $

35.009.30% $ 58.00 7.70% $ 72.00

16

PumKash 23.40% $

35.0020.70% $ 50.00 24.30% $ 65.00

Ballerz 18.30% $

34.9910.40% $ 59.00 6.90% $ 83.00

D C Shoes 18.20% $

35.0011.90% $ 58.00 13% $ 72.00

17

PumKash 17.50% $

35.0017.80% $ 50.00 20.20% $ 66.00

Ballerz 22.60% $

34.9912.50% $ 57.50 9.20% $ 80.00

D C Shoes 0% $

35.2015.10% $ 58.00 18.10% $ 72.00

18

PumKash 34.50% $

34.0019.60% $ 50.00 19.70% $ 68.00

Ballerz 21.10% $

33.9912.20% $ 57.50 9% $ 80.00

D C Shoes 20.80% $

31.9916.30% $ 56.00 22.80% $ 67.00

Our main competitors were Ballerz and D C Shoes. Initially, we did not play the game to compete with other industry members and did not pay much attention to them until later in the game which was a mistake on our end.

Performance TargetsPumKash Ballerz D C Shoes

Year EPS ROE Stock$ EPS ROE Stock$ EPS ROE Stock$

11 $ 2.00 12.40% $ 19.18 $ 2.60

15.80% $ 26.97 $ 3.60

21.20% $ 52.70

12 $ 5.16 26.10% $ 91.50 $ 6.72

32.60% $ 129.69 $ 6.10

27.90% $ 113.54

13 $ 5.80 23% $ 104.54 $ 8.17

30.20% $ 171.88 $ 5.91

21.60% $ 113.19

14 $ 6.70 21.30% $ 124.14 $ 8.38

24.40% $ 180.98 $ 5.69

17.70% $ 91.25

15 $ 7.54 19.50% $ 117.08 $ 8.29

19.90% $ 129.34 $ 5.44

14.90% $ 71.57

16 $ 8.71 18.60% $ 131.03 $ 8.88 18% $ 118.49 $ 8.21

19.40% $ 135.80

17 $ 7.89 14.30% $ 99.25 $ 11.49

19.70% $ 184.20 $ 8.37

16.90% $ 134.74

18 $ 9.16 14.40% $ 117.09 $ 12.32

18.50% $ 191.06 $ 10.83

18.90% $ 178.94

Discus differences in performance targets and ratios and what they mean

GPumKash

RatioYear

11Year

12Year

13Year

14Year

15Year

16Year

17Year

18Gross Margin 40% 46% 47% 48% 44% 47% 46% 44%

Operating Margin/ROS

15.2% 25.4% 26.6% 27.7% 25.6% 27.3% 25.1% 23.6%

ROA 7.40% 16.7% 16.5% 16.6% 15.9% 16.2% 12.8% 16.9%

ROE 12.40% 26.10% 23% 21.30% 19.50% 18.60% 14.30% 14.40%Current Ratio 2.89 3.52 4.44 4.24 6.04 12.06 14.46 16.76

Debt to Asset Ratio 0.31 0.22 0.15 0.09 0.05 0 0 0Debt to Equity

Ratio*0.55 0.38 0.24 0.15 0.11 0.04 0.04 0.04

Total Asset 0.89 1.05 0.97 0.91 0.93 0.87 0.72 0.75

TurnoverBallerz

RatioYear

11Year

12Year

13Year

14Year

15Year 16

Year 17

Year 18

Gross Margin 45% 52% 52% 51% 49% 52% 49% 49%Operating

Margin/ROS18.0% 32.0% 33.0% 32.0% 29.0% 31.0% 30.0% 30.0%

ROA 9.4% 21.2% 21.7% 19.3% 16.7% 15.7% 17.8% 12.9%ROE 15.8% 32.6% 30.2% 24.4% 19.9% 18% 19.7% 18.5%

Current Ratio 3.12 3.9 5.71 5.92 6.52 7.76 12.99 13.49Debt to Asset

Ratio0.20 0.21 0.14 0.08 0.05 0.02 0 0

Total Asset Turnover

0.89 1.00 0.98 0.87 0.81 0.71 0.84 0.79

Ratio Year 11Year

12Year

13Year

14Year

15Year

16Year

17Year 18

Gross Margin 46% 51% 51% 48% 44% 48% 46% 50%Operating Margin/ROS 22.0% 29.0% 28.1% 30.0% 26.9% 26.1% 24.1% 27.8%

ROA 12.0% 18.6% 16.4% 14.6% 13.5% 17.0% 15.1% 17.7%ROE 21.2% 27.9% 21.6% 17.7% 14.9% 19% 16.9% 18.9%

Current Ratio 2.23 5.06 6.86 9.79 10.08 8.34 8.83 9.89Debt to Asset Ratio 0.33 0.2 0.14 0.09 0 0 0 0

Total Asset Turnover 0.9 1.01 0.88 0.72 0.73 0.93 0.89 0.9

11 12 13 14 15 16 17 180

10

20

30

40

50

60

24.5

8.7 8.2 10.2

2623.4

17.5

34.5

Private Label Market Share

PumKashBallerzD C Shoes%

11 12 13 14 15 16 17 180

5

10

15

20

25

14

17.9

21.4 20.3 20.2 20.717.8

19.6

Wholesale Market Share

PumKashBallerzD C Shoes

Years

%

11 12 13 14 15 16 17 180

5

10

15

20

25

30

21.424.8

2123 22.5

24.3

20.2 19.7

Internet Market Share

PumKashBallerzD C Shoes

Years

%

Lessons Learned