1

Management Team
E

Executive Summary
Actigear pushes the envelope with a differentiation strategy and reaching the best value for
money. We will aim to be at the forefront of the market to create a strong brand image, to both
our wholesalers and retailers. Free shipping, a support of marketing for retailers combined with a
single endorser that would be the face of the brand, and using CSR as our primary non-
negotiable investment.

We will aim to Create models that fits every level of change-makers, whether you are just
starting out or have been through thick and thin, we will provide a variety of designs that does
not overcompensate (minimum 250 models). We will implement a balance of human resource
strategies and technology and facility investment to maintain a consistent quality that our value-
seeking customers look out for. We will seek to establish a manufacturing presence across all the
regions and achieve not just consistent deliverability and support to our retailers, maintain a
competitive online presence that is at least at parity with the top spending online company. Prior
to Year 15, we will reevaluate the geographical presence for each region or proceed to focus on
key factories in key regions.

Following the industry average performance of Year 10 with all companies at an even playing
field, starting strong and creating with a strong positioning will enable us to differentiate both
our products and our performance in the long term. Creating an incentive plan based on quality,
with support for employee best practices, and improved working conditions while we expand our
foothold across regions. Once we have established ourselves, similar to the smartphone strategy,
we will continue to move upwards in the value chain and cover the middle and moving towards
the demand for higher end where we will create a brand image and capture a good profit for our
shareholders in the long term. In order to do that, we will need to build the foundation where our
plan is going in the next 3 years. The plan below outlines each consideration from both financial
and non-financial decisions to achieve the objectives.

Table of Contents

Executive Summary 1
Table of Contents 2
 2
Management Team
Introduction 3
Company Vision 3
Company Mission 3
Core Culture 4
Objectives 5
Company Strategy 6
Industry Reports Analysis 7
Competitive Intelligence Report Analysis 9
Conclusion 11

Introduction
Actigear is an athleisure company with an established presence and 10 years of moving the
world through footwear. With our current production facilities in Asia-Pacific and Northern-
America with four distribution centres, including Europe-Africa and Latin-America,
respectively.

While the current management understands the strong marketing position the previous
management wanted to do, the results do not meet the spending. In order to capture more market
share and improve profitability, we have outlined a strategy based on the current industry trends
and competitive assumptions in order to create a roadmap to exceed Board of Directors Goals
and come up with profitable operation and long-term brand management plan starting with this
3-Year plan as the foundation.

Company Vision

Company Mission
 3
Management Team

Core Culture

Objectives
Key Objectives should include

The five key areas for the next 3 years

The New Management has prepared a 10-Year Roadmap based on the Board of Directors’(BOD)
Goal set for each Key Performance Indicators (EPS, ROE, Stock Price Gains, Credit Rating, and
Image Rating) we plan to set our own stretch targets for the first 3 years following Year 10
● Growing earnings per share/ profit at least +20% annually through Year 13 from $2 to
$3.50.
● Maintaining a return on average equity investment (ROE) of +20% annually from 20% to
23%.
● Achieving an A- credit rating by Year 13
● Achieving and maintaining an “image rating” from 70 to 86 by Year 13.
● Maintaining a S/Q level of 6.0 star to 7.0 star by Year 13
● Achieving stock price gains averaging about an additional 20% annually through Year 13
from $30 to $65
● Ensuring Reject Rates are industry average or below 5%

Company Strategy

Actigear will engage the market with a differentiation strategy while maintaining value for
money.
 4
Management Team

Objectives
Two parts
First part
Key aspects of plan should comprise what is going to be achieved ie key objectives

Key Objectives should include

The five key areas for the next 3 years

    targets  
  Y11 Y12 Y13
Credit Rating      
Image rating      
ROE      
EPS      
Share price      

This can also include objectives for other key areas

Eg reject rates
Growth in revenue
Cash potion
Dividend policy

Second part indicates how the strategy is going to be achieved

E
initiatives to achieve stratgey
Y11 Y12 Y13
average pricing      
star rating      
cost per pair of
shoes      
     
 5
Management Team

     

     

Examples of intiatives

Growing earnings per share/ profit at least +20% annually through Year 13 from $2 to $3.50.
● Maintaining a return on average equity investment (ROE) of +20% annually from 20% to
23%.
● Achieving an A- credit rating by Year 13
● Achieving and maintaining an “image rating” from 70 to 86 by Year 13.
● Maintaining a S/Q level of 6.0 star to 7.0 star by Year 13
● Achieving stock price gains averaging about an additional 20% annually through Year 13
from $30 to $65
● Ensuring Reject Rates are industry average or below 5%

We will invest in technologies to ensure less reject rates, and incentivize performance. We will
save costs in areas that allow us to operate lean and less wasteful in terms of not just our
ecological footprint but also marketing spend. Following the Year 10 performance, where a huge
cost outlayed an average performance, as the new managers we will set to put the money in the
right places such as improved working conditions to improve quality as well as the breadth of
our product line.

Investing in brand image (starting with CSR and later on with a Celebrity Endorser once our
factories can meet more demand), production capacity, and improving S/Q Rating at an early rate
would affirm our value-for-money strategy, as we want to avoid a pricing war with our
competitors and compete on our own blue ocean and minimise sales loss due to under capacity.
We will opt not to produce private labels in the first years to ensure maximum profitability per
pair produced for each region. Reducing reject rates to below 5% would be necessary to
maximise production at its current level and minimise lost sales.

We will enlist at least one endorser to be our brand ambassador starting at Year 12 that
will represent the brand best in the regions we believe will need the most push. Once
we have built our foundation for production in each region, we will enlist the celebrity
that has the capacity to be our ambassador for all the regions.
 6
Management Team
We will seek for the middle ground of the high end and middle
affordability and be the leader in that space. As for the S/Q
Rating, our minimum would be around 6* - 7* SQ Rating
depending on the average global market rating. However, we will
keep the consistency at an improving rate to ensure we capture the market shares upward.

Industry Reports Analysis

In Year 10, unit sales of branded footwear in North America and Europe Africa regions were
about 50% larger than the unit volumes in the Latin America and Asia Pacific regions, with the
ongoing operations, Net Profits, Stock Price, Earnings Per Share, Credit Image and Image Rating
are ensure to be improved and the prospects of long-term growth in the sales of Actigear
footwear are positive.

The current $2 Earning Per Share (EPS) is expected to exceed investor’s expectations on a
consistent basis year after year, to provide growth for the shareholders. Actigear is heavily
concentrating its focus on brand image and balancing profit maximisation and value-for-money
strategies to gain maximum market share while our competitors seek to practice low-cost, we
will optimise differentiation by capturing uncontested market spaces while maintaining our
standard of quality. Shareholders look forward for our company to maintain a return on equity of
21.0% from 19.6% or more annually and this expectation is what we set on as we drive up our
net income during the expansion of our foothold across regions. We also yearn to let our
shareholders believe that our actions are in the best interest of gaining market share.
 7
Management Team
The company stock in Year 10 price averaged at $30 per share
which is anticipated to grow at an average of 20% annually
through Year 15 and about 5% annually in the next 5 years. In
line with achieving or exceeding Earnings Per Share targets, it
will also carry off stock price gains and distribute rising dividends to shareholders.

The importance of maintaining a high Credit Rating is what our company highly values so as to
our shareholders who expects a credit rating of B+ or to even obtain higher. Actigear intends to
exceed the industry benchmark by designing a strategic financial plan that will be an instrument
for keeping a continuous record to track the company’s debit to asset ratio, default risk ratio and
the interest coverage ratio. Our firm plans to maintain a credit rating of at least an A-, which will
give us the bargaining power if and when we decide to take out a loan in which will also give us
the advantage in lowering our overall cost to borrow for investing in the facilities upgrades and
updates.

The footwear industry market currently allows each company to sell an average of 4.84 million
branded shoes and 800,000 private label shoes. The projected global demand for branded shoes
in North America and Europe will grow at 5-7% in the first five years. In Asia Pacific and Latin
America, branded shoes will grow 9-11% in the first five years and 7-9% in the last five years.
Private label on the other hand, is expected to have a growth of 10% universally in the first five
years and 8.5% during the next four years vary upto 2% due to competition levels.

Competitive Intelligence Report Analysis

Evaluating the previous expenditure and performance on Year 10, we have noticed the following
opportunities:
● High spending on Search Engine Optimisation
● High spending on Marketing Support for Retailers
● No spending on CSR, Improved Working Conditions
● No Free Shipping
● Industry Average S/Q Rating and spending to improve quality
● High Reject Rates (7% NA, 10% AP)
● Existing Short Term Loan

First, to bring down the SEO and Marketing Support to minimal levels but still be enough to help
move the inventory across the different regions. Reducing Europe and Latin American marketing
from $9,000 and $7,500 to $7,000 and $5,500 expenses while the production expenses are still
being setup helps to lower unnecessary spending, while minimising the North American and
Asia Pacific spending from $10,000 and $8,000 to around $8,000 and $6,000 respectively. It is
expected the other competitors will also bring down their marketing expenses, but this is
forecasted as an above average expense for Y11.

Working overtime for the duration of the first 3 years so we have enough Revenue and Cash for
investment is essential to be done for facilities upgrades. Due to the additional manpower
 8
Management Team
expense and production costs, we will avoid Private Labels due to
low margins and the risk of losing the contract.

Workforce compensation will be kept minimum, removing fringe

benefits but an incentive is to be given for non-rejected pairs as well as the best practices
training. While our wages are not competitive, the training we will provide for our staff and
improved working conditions will offset that.

Based on the income statement data of the company, Online sales contributed only 20% of the
total net sales revenue. Hence the lion’s share of the marketing spend should be given to the
Wholesale market (contributing 72%). This will be reallocated so that relative to their
contributions 75% will be given to wholesale and 25% will be given to retail with 0 going to
Private label as we will cease production of it. The other competitors have such similar sales
revenues on Year 10, and so it is essential to gain above average spending in the channel with the
most contribution for sales. Considering this, we will increase some aspects of retailer spending
including improving serviceability of delivery so that retailers can order more in line with their
supply chain capabilities.

Following the huge demand in both North America and Europe Africa, it is important to
establish footholds in both regions as early as possible to capture more market share. This is to
prepare a foundation for the future growth expected in Asia Pacific and Latin America following
Year 15 onwards.

Tariffs continue to be a factor in shipping across different borders as well as the exchange rates;
these two will continue to be an opportunity cost that needs to be addressed by investing in
production facilities across all regions to meet the demand of retailers and consumers alike
without compromising the growth in each sector. We will also offer free shipping as a
competitive edge, playing in the medium to high market requires incentive for customers to feel
the value of their purchase to be worth its cost.

The industry begins its pricing strategy at an average of 67 for retail and 48 for wholesale, we
will increase our range of pricing to 75-80 for retail and 50-55 for wholesale to be at the range of
value-for-money. Low-cost providers will aim for below the industry average and niche high-end
market will aim for near high from 100 and onwards. Total Cost per production for pairs in NA
and AP will be $26.84 and $23.36 respectively.
 9
Management Team
Conclusion
Actigear would maintain a solid foundation of a good quality shoe
that is not only worth every penny, but also has varied designs to capture more market segments.
A key component that we would have is that all Actigear operations is geared towards creating
significant change in sustainability and ensuring the wellbeing of both customers and employees.
Technology will help streamline operations and lower reject rates in the future, but in order to
ensure that future, employees must be taken care of and talents are given the opportunity to
perform and be incentivised. Having the presence across all territories might be costly in the long
run, but we will maximise profitability through service lead-times and ensuring everyone who
orders through our online channels will receive free shipping. Ensuring marketing and sales
support in the retail space however will take priority over online promotions due to the large
chunk of demand in getting retail superiority or parity over the top spenders in the channel space.