Creative Strategies in a Shoes Company - Assignment Example

Creative Strategies in a Shoes Company After surveying the information as well as the numerous decisions we would need to make, my company’s strategy was to make some small decisions in the beginning to test the market’s reaction. I saw many opportunities in all markets and wanted to try to take advantage of those opportunities as quickly as possible but without losing any of our current customers. One of the main issues I saw in the beginning was the variety of pairs of shoes that we sold. It was believed that over 100 pairs of shoes would be enough variety. I knew that we needed to increase the offerings but wanted to make that decision after operating for a few years at a profit. Every competitor was a threat to undercut our price. Each market segment had potential to bring in big revenue and the opportunity to give back to the community was present via the contribution to charitable organizations. There was also a potential to have a high quality shoe that surpassed the rest of the competition. Year 11 After looking over some of the information our first thoughts were that our company needed to grab some market share and generate some revenue and hopefully some profit. Luckily it was the first round of decisions so I thought I could make some small choices and see how the market reacted to them. The price was lowered to 68.00 per pair from 75.00 in every market as an attempt to grab market share. However just because our price was lower did not mean that we would lower the quality of the shoes. The industry average remained at around 75.00 per pair so it was looking good that our shoes were selling for a lower price with equal or higher quality. Our online sales were higher than all other companies and we managed to grab a 10% market share. Wholesale sales were lower than all others at 7.4% but our private label market helped make up for some of these losses by grabbing a 10.2% market share. Only 771,000 wholesale pairs were sold but the demand was at 814,000 meaning that we lost sales. The strategy was to make sure that we produced enough to at least meet demand. We used 115% of our capacity which meant higher production costs. Our major strength in this year in the internet segment was our price. The major weakness in this same area was in the number of models we offered. We offered fewer models than the other companies and therefore we were perceived as not having enough variety. We did not appeal to enough consumers and we should have taken this into consideration. Year 12 The capacity of our warehouse was not increased in this year and it is now realized that this was a big mistake. It was also a mistake because increasing capacity could have allowed for more models to be produced and offered. We lost revenue in the previous year due to not being able to meet demand and we should have addressed this issue earlier rather than later. Our prices in this year were raised to try to make up for some revenue that was missed in the previous year. The company experienced major retailer support in this year and that contributed to an increase in revenue. Capacity is very important and could have lowered our costs. We did not necessarily have to increase revenue to increase profit we could have lowered costs and this would have accomplished similar results. Year 13 Prices were raised a bit more than in previous years to remain competitive and to make sure we were not giving any revenue away. This was the strategy from the beginning: to have prices as high as the market could stand and to give back by way of charitable contributions each year and in the form of earnings per share. As a result earnings per share were on the rise between years 11 and 13. Celebrity appeal helped a bit in this year because we started going after some big names. They carried with them some customer loyalty that carried over into our product sales but private label offerings were discontinued in this year which turned out to be a big mistake. Private label offerings should have been increased to take advantage of the celebrity appeal. Year 14 Wholesale market share was on the rise in this year but we did not sell anything in the private label segment and our online market share dropped dramatically. This led to a decrease in sales as well as a decrease in profit. Profits in this year were considerably lower than any other year and even lower than our official year of beginning which was year 11. This was a bad year. We did not take into consideration any of the results and just used some of the same numbers but raising prices hurt us in virtually every market. Year 15 Raising the wholesale price in this year was a big mistake but celebrity appeal helped us to grab a 15.2% wholesale market share. We were able to meet demand with the pairs left over in inventory and it helped us to make sure we did not lose any sales. We recaptured some revenue and mirrored year 13. We should have expanded on this year and continued to do the things that worked and changed those things that were working against us. Year 16 -18 A steady increase of revenue and profit allowed us to hold on to an excellent credit rating and to consistently increase our earnings per share. The company was still making a profit and our prospects were good for the next year. If we were to continue we would have increased capacity and our lack of taking advantage of this was seen almost immediately. We did not increase capacity in fear of having too much inventory on hand that would have lead to enormous storage costs that would have eaten into our profits. Looking back however, we can see that it was not a smart decision. Exhibits A-E outline how well the company did in revenue, earnings per share, etc from beginning to end and Exhibit F shows a consolidated income statement for those years as well. Strategic planning (U.S Government 2009) played a key role in this simulation. Strategic planning proved to be worthwhile because if you did not have a plan of what you wanted your company to do and how they would do it, you found yourself trying anything just to see how it would work. This is what my company decisions were based on and even though we made a profit, the profit margins were not as good as they could have been. SWOT analysis (SWOT Analysis 2009) also played a key role in this simulation. SWOT analysis allowed us to see what our strengths and weaknesses were each year and to make decisions to improve upon them. Marketing research (Marketing Research 2008) also proved important. Our lack of understanding our marketing research lead to years of not knowing who our main customers were and therefore we could not cater to their needs. We tried to be a global company that had something for everyone but realized that we could not do this. However instead of changing our patterns we tried to increase the prices to make up for lost revenue. We needed to use more money in advertising to allow our salespeople to be more creative. This would have driven sales upwards instead of keeping them at a steady plateau. Supply and demand played obvious roles in the simulation especially considering this was an economic simulation. In economic simulations, supply and demand are automatically built in because it drives the market (Investopedia 2010). We also failed to look into how differently each production facility went about conducting business or their diversity. Employees in different countries tend to work differently and this was not taken into consideration (Cultural diversity in the workplace: an evolving initiative 2001). Overall the company did very well since we did not lose any money even during our worse year which was year 11. We managed to continue to pay our bills in spite of making bad decisions and overlooking some key problems. A business plan would have been very useful because it would have shown us what we planned on doing and we would have been able to know what direction to take when things did not go our way (U.S Government 2009). This would have also allowed us to plan for the future and we would have increased plant capacity along with making our workers more efficient. We should have noticed that even though we were improving one aspect of our workers’ environment we also needed to improve the plant which would have been another aspect of their environment as well. Investment decisions would have been much better and we would have operated with some direction and instead of reacting we would have been innovative. I learned many things from this simulation. I learned that the market for any product is dynamic and our decisions change how the market perceives us. If we are informed and pay attention to our different segments, customers, and environment we will make good decisions that our investors would like. If we are not paying attention to the market, the customers, and the environment then we will not make decisions for leadership instead we will be making decisions to try to stay alive in the business. I also learned that lack of planning has to be one of the key reasons that a business would fail. We almost failed due to our lack of judgment and some bad decisions but luckily the simulation took it easy on us. As business owners we needed to take more time to understand the information that was being presented to us and understand the results of our decisions better. We finished pretty well in the simulation as were able to make a profit each year. Investing into our company and in the community would have made a great difference in our image which would have also possibly raised the units that we sold. I learned that many factors come into play when running a company and it is not just dependent upon price. Price is a factor in some countries such as Latin America but price alone will not create sales. In looking back, we did not take advantage of the opportunities that were present to us. If you would remember in the first sentence I felt that we would offer more shoes after a few years of operations, this was not done. I also mentioned the potential of creating a higher than average quality shoe which was also never done. Increasing capacity may have helped us in the long run and our employees might have been able to work better than utilizing more than 100% of capacity. This may have kept employee costs down and raised productivity but this was also not looked into. If I had to go back and do it again I would make different decisions not because of the final results which were good but because of the things that were missed. I would have liked to have seen the results if we had added another manufacturing plant, increased existing capacity, and took the time to analyze what the competition was doing a little better. Appendix Exhibit A – Net Revenue Exhibit B – Unit Sales Exhibit C – Market Share Exhibit D – Earnings per Share Exhibit E - Consolidated Income Statement Year 11 – Year 18 References Creative strategies in advertising February 22, 2008. http://en.wikipedia.org/wiki/Creative_strategies_in_advertising (accessed February 11, 2010). Cultural diversity in the workplace: an evolving initiative 2001. http://www.diversity.com/CulturalDiversityInTheWorkplace.html (accessed February 13, 2010). Investopedia. Economic Basics: Demand and Supply 2010. http://www.investopedia.com/university/economics/economics3.asp (accessed February 13, 2010). Marketing Research 2008. http://en.wikipedia.org/wiki/Consumer_research (accessed February 12, 2010). SWOT Analysis 2009. http://www.mindtools.com/pages/article/newTMC_05.htm (accessed February 12, 2010). U.S Government. Write a Business Plan. 2009. http://www.sba.gov/smallbusinessplanner/plan/writeabusinessplan/SERV_STRATPLAN.html (accessed February 12, 2010). Read More