Revised Presentation BSG Year 16

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 16.
Key Success Factors
 From Footwear Industry:
 From BSG:
 Effective Quality Control
 S/Q Rating
 Economies of Scale
 Operational Efficiency
 Establishment of Brand Names
 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 can be obtained by acquiring economies
of scale as management reduces cost per unit by increasing capacity.
•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 16 :
• S/Q Rating
• Operational Efficiency
Key Success
Factor
Company
Score
Industry
Average
Strength
Assessment
Score
S/Q Rating
6
5
4
0.533
0.555
4
315
97
5
• Celebrity Appeal
•
Based on the strength assessment
score, management is
performing at or above average
in all three BSG key success
factors.
Operational
Efficiency*
Celebrity
Appeal
* Operational efficiency= Cost of Pairs Sold/Net revenues year 16
Market Share Growth Trend
North America
Europe/Africa
Asia/Pacific
Latin America
Year 11
15.90%
16.30%
17.70%
14.50%
Year 12
16.00%
15.20%
17.50%
14.70%
Year 13
14.90%
14.90%
17.30%
14.50%
Year 14
13.60%
14.70%
15.60%
15.20%
Year 15
12.30%
13.60%
14.40%
13.30%
Year 16
10.60%
10.30%
9.90%
9.40%
Data only represents market share for wholesale segment.
Analysis shows market share is decreasing on all geographic regions. Management
should determine the causes for this decline in order to regain lost market share and
build a sustainable competitive advantage in all four geographic regions.
Wholesale Segment Market Share
20.00%
18.00%
16.00%
North America
14.00%
Europe/Africa
Asia/Pacific
12.00%
Latin America
10.00%
8.00%
Year 11
Year 12
Year 13
Year 14
Year 15
Year 16
Financial Performance Trend
EPS
year 11
year 12
year 13
year 14
year 15
year 16
3.28
6.18
4.42
5.68
2.82
8.33
ROE
19.50%
27.80%
16.50%
19.60%
8.00%
19.80%
Net Profit*
12.60%
18.30%
13.00%
15.90%
7.60%
17.80%
*Net Profit as a percent on net revenues.
ROE, EPS, and Net Profit were exceptional on year 12. Company B experienced a decline
in years 13 and 15 but was able to increase them in year 14 and 16. As shareholders we
would like to see these numbers return to their year 12 levels. Management should
determine the causes of the decline in years 13 and 15 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
year 15
year 16
Earnings per share (EPS)
9.00
8.00
7.00
6.00
5.00
EPS
4.00
3.00
2.00
1.00
0.00
year 11
year 12
year 13
year 14
year 15
year 16
Recommendation
 To create and sustain competitive advantage in relationship with
customers we recommend the following:
 We are pleased to see management has increased their celebrity
endorsements and are operationally efficient, but they should keep an eye
on the relationship between quality and price because it is not in line with
their competitors. Thus the S/Q rating should increase or prices should
decrease.
• To create and sustain competitive advantage in relationship with
shareholders we recommend the following:
 Management should continue giving out 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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