Professional Documents
Culture Documents
Business Strategy Final Report
Business Strategy Final Report
Strategy
BSG Group Writing
Report
2009/2010 Semester B
Gager II Company
Table of Contents
- Financial Strategy
- Production Strategy
- Segment Strategy
- Marketing & Advertising Strategy
3. Why the winner wins the game? Why the loser loses the game?
4. Conclusion
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Gager II Company (Company G) – Business Strategy Analysis Report
We have used various strategies in terms of financial, pricing, segment & production,
marketing and advertising strategies to achieve our company vision and also aim to
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.
Financial Strategy
Good Cash Flow
We understand it is very crucial to maintain a good and positive cash flow to run a
business, we were able to achieve good financial position every year except the Year
of 13, the cash flow shown as zero because the overdraft is applied for clearing the
unsold inventories.
Year USD’000
(Cash on hand)
11 11,953
12 3,767
13 0
14 5,079
15 19,260
16 67,561
17 66,140
18 69,897
19 26,489
20 81,984
Dividend Payout
Since we have sufficient cash flow throughout the entire period, therefore we applied
dividend payout approx. from the range of 5% to 38.5% of our annual net income
from Year 13 to Year 20. We believe the dividend payout strategy would likely assist
to increase company corporate image. Please see below chart for details.
Year USD’000 Dividend amount Payout Ratio
Net Revenue per share
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Gager II Company (Company G) – Business Strategy Analysis Report
11 243,479 0.00 0%
12 296,392 0.00 0%
13 304,611 0.76 21.7%
14 343,346 0.40 26.8%
15 387,367 0.50 9.9%
16 382,824 1.00 16%
17 354,878 1.20 38.5%
18 446,442 0.40 5.1%
19 392,903 0.50 10.0%
20 486,593 0.50 7.0%
Credit Rating
We were able to keep our credit rating on A+ from the Year 15 to Year 20 and we
thought we would leverage the credit facility whatever applies and the cost of
borrowing would help to achieve the lower cost, however we ever borrowed loans
hroughout the entire business years.
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Gager II Company (Company G) – Business Strategy Analysis Report
We repurchased our company shares during the Year 13, 15, 18, however we
repurchased 500 no of shares due to sufficient cash flow during the Year of 19.
Production Strategy
Plant upgrade
We upgraded the aassembly production line to reduce reject rate by 50% (NA Plant &
AP Plant); Equipment upgrade to boost S/Q rating by 1 star (NA Plant only) and
facilities upgrade to boost worker production by 25% (AP Plant only)
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Gager II Company (Company G) – Business Strategy Analysis Report
Segment Strategy
Internet Segment
We were always applied a pricing strategy of relatively below the average of industry
price in order to capture market share throughout the entire business years (except
Year 19). See below tables for price comparison (Company Price Vs Industry
Average Price among peers)
S/Q 5 6 7 8 7 7 7 6 5 4
Rating
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Gager II Company (Company G) – Business Strategy Analysis Report
Rating
Wholesale Segment
The pricing strategy we have been used in wholesale segment was depended on the
S/Q rating and celebrity appeal availability. We set higher price than industry average
when we successfully bided celebrity appeals in particular regions. Otherwise we
preferred to use relatively lower price (use industry average as our benchmarks for
pricing strategy). Please see below tables for details in pricing comparison.
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Gager II Company (Company G) – Business Strategy Analysis Report
(US $)
Market 8.8% 10.1 10.4 8.7% 12.8 9.6% 10.1 9.4% 9.5% 11.2%
share % % % %
S/Q 5 6 7 8 7 7 7 6 5 4
Rating
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Gager II Company (Company G) – Business Strategy Analysis Report
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Gager II Company (Company G) – Business Strategy Analysis Report
We found the profit margin in Private Label Segment was pretty low and market
shares were not reasonable achieved in the first few years even recorded “zero” in
Year 14, therefore we immediately shifted our key focus to internet and wholesale
segments exclusively (except Year 19). Please see below chart for details.
We believe the essential advertising strategy to boost our sales volume are highly
correlated to the total amount of advertising expenses, so we decided to allocate our
advertising budget in the very first beginning and even increased significantly in the
later stage. We spent approx of 16% of net revenue from the Year 11 to Year 16 and
raised historical high to 34% in Year 19.
We were successfully appointed four celebrities in later stage to boost our sales and
continuously promote our company & product image. As a result, the marketing &
advertising strategy really helped to raise the net revenue and more importantly
maintain our market share among the keen competitors.
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Gager II Company (Company G) – Business Strategy Analysis Report
We would like to explain in greater details on how our successful strategies achieved
the firm vision.
With reference to the ‘selected balance sheet data’ in the last year (year 20), we were
eventually able to possess the greatest amount of ‘liquidity’ against other competitors
in the industry.
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Gager II Company (Company G) – Business Strategy Analysis Report
We have the strongest liquidity so able to gain the greatest support from celebrities,
and contribute most in marketing expenses, and hence to promote and boost our sales.
Our products were therefore generally recognized by public in the result of the
greatest market share we had on internet. Please see ‘company G’s market share’ chart
below:
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Gager II Company (Company G) – Business Strategy Analysis Report
about 16% on average and even beyond 20% in some years due to the greatest
recognition in public.
We benefited from the abovesaid strategy which drove us not to accidentally fall
behind other competitors in the industry although we could not be the number one
there. This strategy helped us to be positioned in the ‘middle’ of market (see
scoreboard below):
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Gager II Company (Company G) – Business Strategy Analysis Report
Financial Strategy
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Gager II Company (Company G) – Business Strategy Analysis Report
With the adoption of good financial strategies, the credit rating of company B is the
highest one among others.
Production Strategy
Flexible Strategies
To win the game, the production strategies must be flexible to adept with different
market pattern (e.g. level of competition, exchange rate issue, warehousing expense
issue). For example, Company B had an adopted differentiated strategies in the
production with different S/Q rating for different market. During Year 15 to 20, , they
produce the footwear with 10 S/Q rating in Latin America whilst the footwear for
other 3 markets have only 2 S/Q at the same period. It suggests that they applied a
flexible strategy in its production.
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Gager II Company (Company G) – Business Strategy Analysis Report
Marketing Strategy
Aggressive Advertisement Campaign in Latest Years
As it is generally believed that the competition is not keen in the early stage of the
simulation, the expenses on advertisement had only raise up slowly. For example, the
advertising expense of Company B had only grew from 11,000 to 14,500 until Year
16, however, the expenses had been increased significantly to 23,000 thereinafter and
when in Year 20, the advertising expenses for all 4 markets had reached 25,000
maximum. It reflects that they raised advertising expense significantly after Year 16 to
fight over the keen competition.
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Gager II Company (Company G) – Business Strategy Analysis Report
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Gager II Company (Company G) – Business Strategy Analysis Report
The following explains what have gone wrong with the loser’s strategies.
Financial Strategy
Conservative Mind
One of the major reasons was the loser being too conservative in making financial
decisions, the most obvious phenomenon is that they did not borrow bank loan to
extend the business, this is because they think it is too risky to borrow loan for
investment. However, they will lose the chances for expanding the business due to
conservative mind. For example, Company D had not spent any for expand production
plant with zero L-T debt.
Production Strategy
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Gager II Company (Company G) – Business Strategy Analysis Report
of the existing product. Also, the unsold inventory affects the financial status by
showing in the statistics of “Days of Inventory”. To clear the unsold inventory, its
sales price will be set at a discount. It will harm the profitability.
For example, Company D had a figure of 365 “Days of Inventory”.
Marketing Strategy
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Gager II Company (Company G) – Business Strategy Analysis Report
4. Conclusion
After the game, we learn the suffering from the Unsold Inventories (Poor Inventory
Control) and also realize the importance of Construction of additional capacity in our
company business strategy among the peers. Why?
Unsold Inventories
We considered to upgrade our S/Q rating to 7 or 8 star in Year 13 under the Branded
Production, since our “unsold inventories” were accumulated and exceeded to
5,247,000 capacities, therefore the S/Q rating was downgraded, our selling price has
to lower significantly in order to clear the inventories, thus the net revenue dropped
and also our cash on hand was reached to zero unexpectedly. Consequently we lost
our competitive strength and thus weaken our overall position in terms of market
share, EPS, corporate rating during the Year 13.
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