Bsg Report

8/17/2019 Bsg Report

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1.0 Executive Summary

ELLO is a shoe company that manufactures branded and private label footwear. Our

footwears have been sold in 4 different regions worldwide, there are North America,

Europe Africa, Asia Pacific and Latin America. e have ta!en over the positions of

managers for the footwear company since year "" and we have been in the industry

for # years. Our company have e$perienced growth and decline in the footwear

industry due to several reasons. %his manager&s report provides a clear review of the

business operations for ELLO footwear company in the footwear industry for

production year "" through year "#. Analysis of past performance of the company

would be discussed on the EP' and (OE of the company in the past # years. %his

report also discussed on the main strategies used by ELLO company as well as the )ustifications on the ability to response to changes in the environment. Last but not

least, this report also )ustified the !ey points that have been learnt by the co*managers

through past successes and failure. (ecommendations for the future are also discussed

in the following report.

2.0 Analysis of past performance

Year EPS ($) RE (!) Stoc" Price #reit

Ratin%s

&ma%e

Ratin%

11 +.# "-.4 4./ A* #0

12 4.+ "1.1 00.+ A

1' /.-/ "".1 +"."+ A -

1 4.- "#.4 #/.4 A2 #+

1 4." "+. 0.+" A2 1

1* /.4 #.0 /-./4 A2 01

1+ .-1 /.4 "./" A2 0"

Table 2.0 Analysis of the past performance, Year 11- 17.

2.1 Year,11

3n starting year of year "", the price of the footwear for the internet segment was

#/.11. %he co*managers had decided to set the price with 11*cent endings for every

branded and private label footwear in the industry. According to the report of

'cience5aily 6/""7, 'chindler mentioned that the 11*cent price endings strategy is a

common mar!eting tool used to attract customers to purchase a product. 8e has

studied that people perceive a big difference in price when the 11*cent price endings

strategy is used. %herefore, the wholesale price for the shoes in North America and

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Europe Africa were 4#.11, price for the shoes in Asia Pacific was 4.11 and 4".11

in Latin America. %he footwear industry was very competitive as the price set by

other competitors were near to the same. 8owever, ELLO company managed to be at

the second position in the footwear industry with +.# earning per share and "-.49

return of e:uity while the stoc! price is 4./.

2.2 Year,12

3n the following year which is year "/, the co*managers have decided to decrease the

price for internet segment to #.11 due to e$cessively higher price compared to other

competitors which caused low demand orders in year "". %he prices of the shoes for

wholesale segment were remained the same. ;uthermore, the shoes for private label

segment were declined e$cept for the Asia Pacific region. 8owever, ELLO company

had once again managed to be at the +rd position with 4.+ EP' and "1.19 (OE.

2.' Year,1'

3n year "+, the co*managers have decided to implement a differentiation strategy due

to high competition in the industry. %he company has committed to deliver the highest

:uality shoes to the customer at a reasonable price. %he '< ratings of the shoes have

been increased to # stars and it has became the strength of the company. %he

percentage of the superior materials had increased to -9 and --9 in North America

plant and Asia Pacific plant respectively. ;urthermore, the style and features of the

shoes have been upgraded as well in both plants. %he cost for the compesation

training in NA plant and AP plant were both increased in order to reduce the re)ection

shoes rate. As for the private label segment, the managers decided to pull*out from

the Latin America region and focused only on the other + regions. %he reason of

pulling out was to mainly focus on the wholesale segment in Latin America. %he

company also increased the cost for advertising to #.- millions in order to increase

the image ratings and return on e:uity. =nfortunately, due to high e$penditures on

mar!eting e$penses and high cost materials, the EP' and (OE falls to /.-/ and

"".19 respectively. %he stoc! price has also fell to +"."+ and undoubtedly, we have

fell to the 0th position in the industry.

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2. Year,1

>ear "4 was an e$cellent year for the entire footwear industry. All of the footwear

companies had done well and met the investor e$pectation. %he '< ratings of the

shoes were still rated at # stars in order to emphasi?e high :uality shoe. %he co*

managers have decided to increased more on advertising and the delivery time had

been shortened to two wee!s. 3n order to do so, the co*managers would have to

increase the price of the shoes in the wholesale segment in order to cover the high

e$penditures on the superior materials cost, the mar!eting cost as well as the high

e$change rate. %he increment of sales in private label segment had successfully

increased the EP' and (OE to 4.- and "#.49 respectively. ;uthermore, the value

of stoc! price had huge increase from +"."+ to #/.4. %he credit rating of the

company had also went high to A2.

2. Year,1

3n order to avoid from any big loss in year "0, most of the strategies and decisions

were remain the same. %here were only slight changes have been made to the price on

internet segment and wholesale segment. As for the corporate social responsibility, the

co*managers have decided not to do any @'( programme in order to reduce the cost.

=ndoubtedly, the image rating of the company fell from #+ to 1. esides that, the

EP' and (OE have fell to 4." and "+9 respectively, as well as the stoc! price has

fell from #/.4 to 0.+". %he main reason of such fall was due to the minor changes

had been made to the decision entry as well as the company did not able to bid for any

celebrity. %he other competitors had stong celebrity appeals to increase the mar!et

share as well as the image ratings.

2.* Year ,1*

3n year ", the company has suffered a great loss due to several reasons. ;irstly, the

company did not able to get the private label sale in North America region which

greatly impacted on the EP' and (OE of the company. %he EP' and (OE of the

company have fell to /.4 and #.09 respectively, the stoc! price has also fell to

/-./4. At this point, the company decided to decrease the cost on materials, %


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Africa and Latin America, the company had started to suffer losses in distributing the

shoes. =nfortunately, we had fell to the th position in the footwear industry.

2.+ Year,1+

>ear "# was the last year and it was a terrible year to ELLO company. %he EP' and

(OE of the company had fell terribly to .-1 and /.49. %he main reason of such

outcomes was the company did not managed to sell any shoe in private label segment

in 4 regions. %he wholesale segment were doing good because the co*managers have

decided to increase the models availability of the shoes. %he company did not met the

investor e$pectation and therefore the company had fell to the last position of the

footwear industry.

'.0 -e main strate%ies pursue

ELLO&s company strategies are to compete actively in + segments which is the

wholesale segment, internet segment and private*label segment.

5ifferentiation strategies have been adopted by ELLO in wholesale and internet

segments, because there were too many standardi?ed or similar products in the mar!et

and was proven to be too competitive for ELLO to operate in that industry. e also

found that, even if we able to sell the shoes, the profits would be very low due to

strong competition in the industry.

%herefore, we decided to implement the first mover advantage by offering high

:uality footwear with # stars 'C< rating in >ear "+ which was different from the

competitors. Our strategy was to deliver the highest :uality shoes while maintaining

at a competitive price. y applying differentiation strategy, we could avoid from price

war within the industry and command a better price for our products.

'ince then, ELLO updraded the features and styles of the shoes to clearly set

ourselves with the competitors. ;irstly, we strived to create superior product features,

design, and performance by increasing the usage of superior materials for our

footwear, enhanced styling and features and also emphasi?e on %


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production (D5 activities. e constantly engaged in production (D5 that could

improve our product :uality and reduce wastage. 3n year "0 and year ", we had

successfully upgraded our plant in North America and Asia for our assembly line to

reduce re)ect rate by 09. %he increment of the compensation and training for the

employees have increased the productivity and reduce re)ect rate. Lastly, we also

understand the importance of mar!eting and brand building activities. Emphasi?e on

mar!eting and brand buildings activities helped us to increase our brand image and

also strengthen our brand name. e mainly focused on advertising because it has

tremendous effect on the value perceived by the buyers therefore increase their

confidence to purchase our footwear. 5ue to strong competition, we constantly

increased our advertising budget to bring out the best effect.

8owever, due to the sudden rise in the e$change rate and also increasing competitors

in the # stars footwear industry, our company has forced to decrease the '< ratings to

avoid price war as the costing for our shoes were too high. e choose to produced

stars footwear because the cost was lower. 8owever, the strategies above remain the

same. e continuously emphasi?ed on mar!eting activities such as increase fees in

advertising and celebrity appeal, and increased our shoes models in the late stage of

the competition add promotion.

;or our private*label, we choose to use the best cost provider strategies. %his sector

proved to be very unpredictable and competitive, competitors may choose to leave or

come in anytime and private labels may re:uire us to ma!e ad)ustment. %his strategy

fits ELLO well because we could ad)ust our price more efficient with appealing

attributes re:uired by the private label and also able to response to the e$ternal threat

such as e$change rate more effectively.

.0 A/ility to response to can%es in te environment

3n a very competitive industry and rapid changes over the year, we have tried to adapt

with the drastic and une$pected situation. ;or the first three years, nothing much

changed only minor alteration. %he year after was :uite challenging as other

companies started to put the head into the game, ad)usting with the price, push their

mar!eting efforts, bid for celebrities and offered the best price for private label.

@hanges such as the price and '< ratings affected us as it pushed down our revenue

and company mar!et share.

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;or '< ratings, we would not !now what would the competitors would do, either to

increase or decrease. e decided to move apart from them by using differentiation

strategy. %herefore, we can still be competitive in the industry. Each year, we

observed the changes and the pattern of our competitors in term of pricing both

wholesale and internet, their performance and '< ratings. %he ma)or changes that we

did to adapt with the industry was the pricing, mar!eting effort and '< ratings. At

first, our '< rating was at 0. %hroughout the year, we increased it by " and the

ma$imum was #. %he reason why of we did not go beyond because we could not

compete with our competitors with higher '< rating and their pricing was :uite low

too. On the other hand, we did not want to get influenced and controlled easily by our

competitors in terms of pricing.

;uthermore, we had slightly decrease our price for the first + years from 4- to

4.11 for wholesale segment. %he years after, we increased the price due to higher

'< rating. Price was vary for different continent and for the Asia Pacific region

usually have the lower price. ith competitors in the mar!et, we wor!ed hard to

compete and observed each other strategy based on the competitive intelligence

reports. 'ome companies in the industry were playing with the price structure until we

or perhaps other company get the negative impact. %here was a year that we need to

lower down our '< rating from # to as we could not compete with the company on

the top. e tried to play safe in order to generate revenue and mar!et share. 3t was

indeed a very competitive industry with companies offered a low price with high '<

ratings. %hat was how we adapt to changes, either we push up or lower it down.

.0 ey points learnt

;irst of all, the main !ey point that we have learnt throughout the ' is always

move faster and do bigger before our competitors do. 3t is relatively important to be

one step ahead of the competitors because the company will have the first mover

advantage. ;or e$ample, the competitors have built new plant in Latin America region

to avoid from high tariffs and high e$change rate but our company was yet to build

one therefore we had to bear with the high cost e$penditures. esides that, ELLO

company had not bid for a celebrity to the point that all of the competitors& (OE and

EP' had increased due to their celebrity appeals, only then ELLO company started to

bid for a celebrity.

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'econdly, the !ey point that we have learnt is we must develop a strategic vision and

mission statement at the first place. 'trategic vision and mission statement able to

provide a clear direction and strategic path to the company. %he company should

commit to the vision and mission as it will shows us Fwhere are we going and why&.

ELLO company did not have a strategic vision and mission statement therefore the

company had continously changing the strategic plans. ;or e$ample, ELLO company

constantly changed the '< ratings of the shoes. At the first place, we commited to

deliver the highest :uality shoes to the customers but in the end we failed to do so.

%he reason for not commiting till the end is because we were unsure on our strategies

and decisions. %hus, clear strategic vision and mission statement are strongly needed

before any decision has been made.

Lastly, the !ey point that we have learnt is do not get influenced and controlled easily

by your competitors. %he competitors constantly reduce the price of the shoes in

wholesale segment and private label segment. %hey set their prices as low as they

could to the point that the operating profit has became negative. 3t was a Fcommit

suicide& way for the competitors to operate the footwear company as the main

ob)ective of the game is to increase the net profit. ELLO company did not get

influenced or controlled by the competitors because the company would have suffer a

great loss if we follow the same way. 3nstead, ELLO company did a differentiation

strategy which increased the '< ratings of the shoes and sell it at a standard price.

*.0 Recommenations for te future

5ue to limited capital availability, we did not build a plant in other regions. 8owever,

the demand in other regions was growing, building plants in foreign regions have

became an option to e$pand. ELLO did not able to build a plant in Europe*Africa and

Latin American. 3t then caused our production cost to be a lot higher than our

competitors who build a plant in other regions. %herefore, establish a plant in foreign

country can avoid from high e$change rates on cost to e$port our product to other

regions

'econdly, it is better for the company to contract with celebrity figures as soon as

possible. Endorsements from appealing celebrities enhance the brand image of the

footwear company and it positively affects consumer purchase. @ompany with more

influential celebrity lineups en)oy an advantage in mar!eting their shoes over those

companies without a celebrity endorsement. %herefore, footwear company should

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contract with celebrity figure before the competitors start to do so because once the

competitors started to bid for a celebrity, the bid price will go higher to the point that

the e$penditures on celebrity endorsements will be e$ceeded.

%hirdly, plan the stategy wisely is relatively important to the company. Once the

strategy has been chosen, stic! with it over a long period. 'trategy should be set based

on long run but not short run. e believed ELLO should be a dominant*business

enterprises, which having a ma)or core business that involved themself in wholesales

and internet segments that accounts most of their total revenues. %hen small amount

of revenues can be collected from private*label segment which is more competitive

and unpredictable.

%he last recommendation is to increase '< rating for the product across the continent.

y increasing '< rating, ELLO company can compete with other competitors at the

same level. Perhaps at this time, pricing will not be a problem. Loo! bac! at the

financial history and the competitive intelligence reports. ;rom there, you can learn

and observe the pattern of your own company and also fellow competitors in the

industry. 3t is important to analyse your industry together with the competitors so you

are on the right trac!. 3t is important to evaluate the competitors. uilding capacity

also can be method to push the company up. Another tips can be consider is to borrow

less. %hat will ma!e the company financial stable and refinance it when the company

thin! it is time for it. Also to issue stoc! shares even at beginning of the year.

+.0 References

'cience5aily /"". 99-Cent Pricing ay !ot "e #orth the Penny, $ays %&pert . Gpress

releaseH "/ 'eptember /"".

%hompson, A., Peteraf, B., amble, I. and 'tric!land, A. /"+. Crafting an'

%&ec(ting $trategy. "1th ed. 'ingaporeJ Bcraw 8ill.

%ruist. /"+. #hy Corporate $ocial )esponsibility is so *mportant in 201+ . GonlineH

Available atJ httpJCCtruist.comCwhy*corporate*social*responsibility*is*so*important*in*

/"+C GAccessedJ " Nov /"+H.

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