Company B Industry 42 presentation

Report
BSG Company B Industry 42
Presented by:
•Sebastian Corredor
Senior, Business Administration- Finance, December 2010
•Johnathan Lee
Senior, Business Administration- Finance and Supply Chain Management, May
2011
•James Ball
Senior, Accounting- Managerial Accounting, May 2011
5 Forces Analysis, Industry 42
COMPETITIVE
FORCES
LEVEL OF COMPETITION
Years 11-14
1) SUPPLIERS
HIGH: 52.8% superior materials usage thus prices increased 5.6% over the
price base.
2) BUYERS
HIGH: 7 different sellers
-Most sales and revenues from wholesale segment
-Switching costs are low
3) SUBSTITUTES
LOW: No evidence customers will switch to other products on other
industries.
4) RIVALRY
MODERATE: only one competitor roughly equal in size (Co. A)
-Industry has high rate of sales growth
-Most sales from Wholesale segment
-Even at full overtime production, capacity is shy to meet future demand
5) THREAT OF ENTRY
LOW: No evidence that new companies will enter market.
-Industry 42 distributed among companies A, B, C, D, E, F and G
5 Forces, New Entry, Industry 42
 Summary:
 Suppliers: HIGH
 Buyers: HIGH
 Substitutes: LOW
 Rivalry: MODERATE
 Threat of Entry: LOW
 Because there are a total of
TWO low forces, expected
profitability of a new
entrant would be ABOUT
EQUAL to average cost of
capital.
BSG Strategic Group Map
This strategic position represents the North America region in year 14.
Key Success Factors
 From Footwear Industry:
 Effective Quality Control
 Economies of Scope
 Establishment of Brand Names
 From BSG:
 S/Q Rating
 Operational Efficiency
 Celebrity Appeal
•Between the athletic footwear industry and BSG, effective quality control and S/Q
rating are similar. Effective quality control benefits the S/Q rating in the simulation.
•In addition, Operational Efficiency from BSG will utilize an Economies of Scope
appeal from the athletic footwear industry.
•Furthermore, Establishment of Brand Names from the footwear industry and
Advertising from BSG have similar connections. A major component of brand name
recognition arises from celebrity appeal.
Strength Assessment
Strength Assessment Table
•
The strength assessment is based on
the three BSG key success factors,
taken from the North America
wholesale segment in year 14 :
• S/Q Rating
• Model Availability
Key Success
Factor
Company
Score
Industry
Average
Strength
Assessment
Score
S/Q Rating
6
5
4
Model
Availability
340
241
5
Advertising
(thousands)
7100
7357
3
• Advertising
•
Based on the strength assessment
score, management is
performing at or above average
in all three BSG key success
factors.
Market Share Growth Trend
year 11
year 12
year 13
year 14
North America Europe/Africa Asia/Pacific Latin America
15.9%
16.3%
17.7%
14.5%
16.0%
15.2%
17.5%
14.70%
14.9%
14.9%
17.3%
14.5%
13.6%
14.7%
15.6%
15.2%
Data only represents market share for wholesale segment.
Analysis shows market share is decreasing on all geographic regions except for Latin America,
which has slightly increased. Management should determine the causes for this decline and
implement competitive strategies based on key success factors in order to regain lost market
share and build a sustainable competitive advantage in all four geographic regions.
Wholesale Segment Market Share
18.0%
17.0%
16.0%
North America
Europe/Africa
15.0%
Asia/Pacific
Latin America
14.0%
13.0%
12.0%
year 11
year 12
year 13
year 14
Financial Performance Trend
EPS
Year 11
Year 12
Year 13
Year 14
ROE
Net Profit*
3.28 19.50%
12.60%
6.18 27.80%
18.30%
4.42 16.50%
13.00%
5.68 19.60%
15.90%
*Net Profit as a percent on net revenues.
ROE, EPS, and Net Profit were exceptional on year 12. Company B experienced a decline
in year 13 but was able to increase them in year 14. As shareholders we would like to see
these numbers return to their year 12 levels. Management should determine the causes of
the decline from year 12 to 13 to prevent future fluctuation.
ROE and Net Profit
30.00%
25.00%
20.00%
ROE
15.00%
Net Profit
10.00%
5.00%
0.00%
Year 11
Year 12
Year 13
Year 14
Earnings per share (EPS)
7
6
5
4
EPS
3
2
1
0
Year 11
Year 12
Year 13
Year 14
Recommendation
 To create and sustain competitive advantage in relationship with
customers we recommend the following:
 If top management would like to keep the same price in wholesale
segment, they should increase advertising, celebrity endorsements, and
implement increased quality and features.
• To create and sustain competitive advantage in relationship with
shareholders we recommend the following:
 Management should give out more dividends and repurchase stocks in
order to increase their earnings per share and stock price.
References
 "Global Footwear Manufacturing: C1321-GL." IBISWorld
Industry Report. 24. NCSU Libraries. Web. 14 Oct. 2010.
<http://www.ibisworld.com/globalindustry/keyfactors.asp
x?indid=500>.

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