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Strategic Management, Task 2

Analysis of strategic decision-making in various business scenarios.

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    Strategic Management, Task 2 Subject: Strategic Management, Task 2 A. Analy sis of the success of the company in strengthening or compensating for resource weaknesses at a key point during the first year of the simulation. The team involved in the simulation process of the company was not very successful in all aspects of the simulation for the first year. The analyst failed to forecast the operating expenses of the company and the consequence of which could be the highly cost short and medium term emergency loan requirement . But the company got revives from this due to the large amount of cash balance holding from previous year . Also, the analyst team was much ambitious regarding the selling strategy of the company in the internet sale . The ultimate result of which was the low revenue income than the expectation and the negative impact on the operating profit of the company for the first year (The revenue from the internet segment declined to $36295000 from $41905000) . Income Statement Consolidated Income Statement year - 14 year - 15 ( Year 1) year - 16 ( Year 2) year - 17 ( Year 3) year - 18 ( Year 4) year - 19(projected) Gross Revenues: $000s $000s $000s $000s $000s $000s Internet 41905 36295 60690 57205 65120 79376 Wholesale 230013 237953 231589 241949 230903 225345 Private - Label 5075 29522 40660 0 0 0 Gross Revenues from Footwear Sales 276993 303770 332939 299154 296023 304721 Exchange Rate Adjustment 5666 - 605 7294 282 - 10764 - 1201 Gross Revenues from Footwear Sales 282659 303165 340233 299436 285259 303520 Operating Cost: Cost of pairs sold 144937 154491 160715 136910 134447 136624 Warehouse expenses 18394 19637 22295 20461 20761 22578 Marketing Expenses 38741 35521 45504 41678 43297 40983 Administrative Expenses 8576 8637 8698 8765 8830 8898 Operating Profit (Loss) 72011 84879 103021 91622 77924 94437 Interest Income (Expenses) - 9955 - 8909 - 5052 - 166 909 2713 Other Income (Expenses) - 720 - 849 - 1030 - 916 - 779 - 944

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    Pre - Tax Profit (Loss) 61336 75121 96939 90540 78054 96206 Income Taxes 18401 22536 29082 27162 23416 28862 Net Profit (Loss) 42935 52585 67857 63378 54638 67344 The analyst team made decision s regarding the necessary resources early on in the simulation process . Later on , the expectation about the sales figure was made and the cost required to generate the expected sa les was forecasted. But, attention was not drawn to incorporating the fact that the expansion of the business along with the geographic regions and other market segments requires extra resources for the company. As a result, the company stretched its financial capital & resources extremely thin. Also, t he analyst team was very ambiguous regarding the initial selling strategy of the company but failed to incorporate the fact that initially the sales of the company may not be expected due to slow acceptance of the product in the new markets . At the end of the first year the company began to sell in the multiple market segments and geographically expanded its operations. The company a ttempt ed to introduce and sell the products in the new market segments require high cost involvement for the inbound logistics, outbound logistics, sales offices, new store set up, marketing activities, employee compensation , tariff etc. The cost of the pairs sold, warehouse expenses, marketing expenses and administrative expenses all increased in the first year of simulation. Income Statement Consolidated Income Statement year - 14 year - 15 ( Year 1) year - 16 ( Year 2) year - 17 ( Year 3) year - 18 ( Year 4) year - 19(projected) Gross Revenues: $000s $000s $000s $000s $000s $000s Internet 41905 36295 60690 57205 65120 79376 Wholesale 230013 237953 231589 241949 230903 225345 Private - Label 5075 29522 40660 0 0 0 Gross Revenues from Footwear Sales 276993 303770 332939 299154 296023 304721 Exchange Rate Adjustment 5666 - 605 7294 282 - 10764 - 1201 Gross Revenues from Footwear Sales 282659 303165 340233 299436 285259 303520 Operating Cost: Cost of pairs sold 144937 154491 160715 136910 134447 136624 Warehouse expenses 18394 19637 22295 20461 20761 22578 Marketing Expenses 38741 35521 45504 41678 43297 40983

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    Administrative Expenses 8576 8637 8698 8765 8830 8898 Operating Profit (Loss) 72011 84879 103021 91622 77924 94437 This situation created a value chain crisis for the company as revenue was not enough to support the initial high cost of the value creation cost. The company suffered a huge problem in the first year for this miscalculation in available resources. The actual expansion of the company was hampered largely. The analyst team should be conservative regarding the selling strategy for the first few years especially when the strategy is designed for the new market. Moreover , it was required to effectively incorporate the needs of necessary resources to support the market expansion. B. Analy sis of the actions to develop the resource s’ strength at a key point during the last four years of the simulation. The company was unsuccessful as to properly tap resources strengths in the first year of the simulation. So, t he company initiated to take some actions that will ensure the development of the company’s resource strengths as well as to resolve the financial situation created in the first year of the simulation . Several decisions were taken in the simulation beginning in the year two . The company bought some change in the selling strategy. In the mid of the second year , the company decided to stop selling in some geographic regions w h ere the response from the customers to the product were very slow in spite of extreme level selling and promotional efforts on the online . T he concentration was made to set up more retail outlet in those geographic areas where the company got more responds from the customers and conduct more online promotion to these areas from where the company got high internet

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    responses. Also, as the cost of product offering to the private level customer deemed to very high and thus the company decided to stop serv ing this type of customers. By closing the business activities from the unprofitable segments the company significantly curtailed its operating expenses ( logistics, employee, marketing, service center ). This was an improvement for the company. The resources that would be tied up to an unsuccessful venture were made free to inject in a profitable venture. The financial condition of the company was improved later on this decision. The ultimate result s of these decisions w ere the lower operating cost in the year 3 of the simulation and high profit from the wholesale and internet segment. Income Statement Consolidated Income Statement year - 14 year - 15 ( Year 1) year - 16 ( Year 2) year - 17 ( Year 3) year - 18 ( Year 4) year - 19(projected) Gross Revenues: $000s $000s $000s $000s $000s $000s Internet 41905 36295 60690 57205 65120 79376 Wholesale 230013 237953 231589 241949 230903 225345 Private - Label 5075 29522 40660 0 0 0 Gross Revenues from Footwear Sales 276993 303770 332939 299154 296023 304721 Exchange Rate Adjustment 5666 - 605 7294 282 - 10764 - 1201 Gross Revenues from Footwear Sales 282659 303165 340233 299436 285259 303520 Operating Cost: Cost of pairs sold 144937 154491 160715 136910 134447 136624 Warehouse expenses 18394 19637 22295 20461 20761 22578 Marketing Expenses 38741 35521 45504 41678 43297 40983 Administrative Expenses 8576 8637 8698 8765 8830 8898 Operating Profit (Loss) 72011 84879 103021 91622 77924 94437 B1. Assessment of how competitively powerful that strength was. The company’s decision to stop business in unprof itable geographic regions was an effective decision to the success of the company . The strength resulted from the stopping of the sales in the unprofitable geographic segments & serving private level customers and more

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    concentration to the online market was competitively powerful as it helped the company to recover the poor financial condition attributed by the wrong decisions made at the start of the simulation. In the second year of the simulation, the net income of the company increased and this increase continued for the subsequent years. This persistent trend of the revenue growth was definitely a consequential strength for the company. The following table depicts the positive trend in the revenue for the online (internet) and wholesale market. Apparently, the revenue of the wholesales seems to decrease over the time period, but this decrease is mainly attributed by the stopping of the sales from unprofitable s egments gradually. In fact, d uring this recovery period, the company was capable to examine its different brands and screen out the appropriate brands for offerings. This enabled the company to capture more market share. The company was successfully able to capture the ‘traveler’ market segment at the end of third year (market share increased 14% to 25%) . Also, the market share of the ‘cost cutter’ segment increased from 20% to 26%. Income Statement Consolidated Income Statement year - 14 year - 15 ( Year 1) year - 16 ( Year 2) year - 17 ( Year 3) year - 18 ( Year 4) year - 19(projected) Gross Revenues: $000s $000s $000s $000s $000s $000s Internet 41905 36295 60690 57205 65120 79376 Wholesale 230013 237953 231589 241949 230903 225345 Private - Label 5075 29522 40660 0 0 0 Company was able to avoid its unnecessary operating cost (warehouse expenses, administrative expenses and administrative expenses, cost for logistic support) incurred in the unprofitable market segments. In the third year of the simulation the operating cost of the company reduced. Income Statement Consolidated Income Statement year - 14 year - 15 year - 16 year - 17 year - 18 year -

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