DJAM

BUSINESS STRATEGIES

MEMBERS:

ANA LUISA LOAYZA MILENE MADRID JOSELYN MOSQUERA

BUSINESSSTRATEGIES 1

CONTENTINTRODUCTION...................................................2

THE STRATEGIC VISION...........................................4COMPANY’S PERFORMANCE FOR ALL DECISION ROUNDS..................5

REVIEW OF THE FINANCIAL AND STRATEGIC PERFORMANCE..............6THE COMPANY’S PRESENT STRATEGY AND HOW IT HAS ENVOLVED........13

DESCRIPTION OF:...............................................15a. Corporate Citizenship Strategy...........................15

b. Production strategy......................................15c. Marketing strategy.......................................15

d. Wholesale strategy.......................................17e. Internet strategy........................................17

f. Private level Strategy...................................17CLOSEST COMPETITORS...........................................18

NORTH AMERICA...............................................18INTERNET SEGMENT............................................18

WHOLESALE SEGMENT..........................................19PRIVATE-LABEL SEGMENT......................................20

EUROPE-AFRICA...............................................21INTERNET SEGMENT............................................21

WHOLESALE SEGMENT..........................................22ASIA-PACIFIC................................................23

INTERNET SEGMENT............................................23WHOLESALE SEGMENT..........................................24

PRIVATE-LABEL SEGMENT......................................25LATIN AMERICA...............................................26

INTERNET SEGMENT............................................26WHOLESALE SEGMENT..........................................27

PERFORMANCE TARGETS FOR THE NEXT YEAR OR TWO..................28


MOVES OVER THE NEXT SEVERAL YEARS TO WIN OUT COMPETITORS, IMPROVE PERFORMANCE AND MARKET STANDING.......................29

LESSONS LEARNED...............................................29

INTRODUCTIONThe Business Strategy Game (BSG) had been an interestingexperience in which we put into practice our knowledge learnedduring the subject of Business Strategy.

BSG is a game based on strategies, in which all the companiescompeting within a same industry pursue the same goal, which isto be the leader in the industry, trying increase the company´smarket share and trying to have the highest percentage of globalmarket participation and the highest sales in all the regionsthat the competitors can participate and do business. Allparticipating companies can pursue their goal through the fiveBusiness-level Strategies.

The management of the virtual company is really close toreality. We as co-managers really wrapped ourselves in the game;we all had the illusion of winning with the sole purpose ofeliminate the competition and steal their market.

This game is really good because is played worldwide and connectwith people with the best universities in the world, and is goodfor us to be participating in this game, the only university inthe country that is applying this teaching.

The industry was made up of six companies, each companyconsisted of three co-managers, which we could share proposalsand decide on all the rounds. Our company randomly was theletter D, so we called to our company DJAM, due to the initialsof our names.

At first, when we showed the game, we were really confusedbecause it is a game a bit complex, with many variables toanalyze and truly is needed to study the rules, the guide of thegame to understand it in depth, despite the instructionsdictated by the teacher.


During the course of decisions, we acquired knowledge andexperience, we understood more of our competitors and we analyzetheir strategy to attack and try to emerge victorious. In thefirst years not we had a good start, but as went advancing wentup the position and positioning ourselves; despite we were notthe winners, we believe we had a good participation and a goodsecond place.

Below is presented our company strategy and as we wentunwrapping in the 10 years of decision.


THE STRATEGIC VISION

The vision of the company is to be leader ofeach region gaining the highest percent ofmarket share with an integrated strategy,having the highly trained and motivated

staff in order to achieve the best qualitywith acceptable prices, based on branded and

internet sales mainly.


COMPANY’S PERFORMANCE FOR ALL DECISIONROUNDS

YEAR 11 12 13 14 15 16 17 18 19 20SCOREBOARD

4 5 4 4 1 1 2 1 2 2

11 12 13 14 15 16 17 18 19 200

1

2

3

4

5

6

Scoreboard

Scoreboard

In this section, we observe our ranking around of 10 years. Aswe can see, our best years were the fifteen, sixteen andeighteen year if we based on the ranking. In addition, we


observe our worst year in this period, which we achieve only thefifth position in the twelve year. The reasons of this failed wewill analyse in other graphics.

REVIEW OF THE FINANCIAL AND STRATEGICPERFORMANCE

Trends in the company’s annual total revenues

YEAR MILLIONS OFDOLLAR

11 252,83312 267,24513 271,8614 324,29415 356,60216 399,21117 474,59118 549,69919 553,71320 680,348


11 12 13 14 15 16 17 18 19 200

100200300400500600700800

Millions of dollar

Millions of dollar

In the previous graph, we analyse the annual total revenues, andwe can observe that our best year was completely in the twentyyear because we achieve the most revenues in all period. Anotheraspect that we can emphasize is the constant grow in therevenues, although the position that we achieved in each year,was not the best. So, our worst year was the eleven year becausein this decision we achieve the minimum revenues.

We can notice the increase in revenue since the year 15, becausein that year recently started betting on celebrities, to investa little more advertising and make improvements in the plants wehad at that time.

Trends in the company’s annual earnings per share (EPS)


11 12 13 14 15 16 17 18 19 2001234567

EPS ($)

EPS ($)

In our first decision, we kept one earning per share relativelylow, because we did not produce enough of shoes and had the fearof investing in order to win more market. Then, in the 15th yearwe can see the big difference in our value because we increasethe earning per share $2.42 to $4.94, and so we continue toincrease this value until the year 19 in which decreased a bitbecause something did wrong in our decision, but then werecovered and reached the highest earning per share ($6.60)

YEAR EPS ($)11 2,5912 2,713 2,5914 2,4215 4,9416 6,0117 6,4618 6,5619 5,8320 6,6


throughout our period of play, which we consider as the bestyear in this regard.

Trends in the company’s annual return on equity investment (ROE)

YEAR ROE11 15,712 14,113 11,914 1015 1816 18,917 17,618 16,219 13,620 14,3

11 12 13 14 15 16 17 18 19 2002468101214161820

Return on Equity

ROE

In the return on equity we see that in the early years we werenot so bad because we obtained a value of 15.7%, but in thefollowing years, this value began to decrease until the year 15in which grew significantly to achieving a value of 18% and thenext year it grew a little more worth achieving 18.9%, which was


our biggest roe reached, because after this decision began todecline relatively and ended up with a roe of 15.2%, the whichwas the third highest in our industry in that year.

Trends in the company’s annual credit rating

YEAR CREDIT RATING

11 A-12 A-13 A14 A15 A+16 A+17 A+18 A+19 A-20 A+

Our company always maintained a good credit rating, because wealways had a high level of image, and also because in the earlyyears didn’t opt to any loan and we kept a high ending cashvalue. Then, in the 15th year we made a loan of 5 years to makean improvement to a plant, and kept the credit rating of A+because we had enough money to cover this debt. In the year 18conducted a loan much bigger of 10 years and the next year ourcredit rating dropped to A- due to the high level of debt thatwe had although we had the funds to pay the debt.

Trends in the company’s year-end stock of price

YEAR STOCK OFPRICE

11 30,1112 29,1713 27,94


14 26,7715 94,5916 114,3917 123,1618 109,1419 75,0920 86,5

11 12 13 14 15 16 17 18 19 20020406080100120140

Stock of Price

STOCK OF PRICE

In this section we analyze the stock price, which we can seethat the highest value achieved was the year 17 with $ 123.16,followed by the year 16 with a value of $ 114.39, which is dueto that in this years maintained high levels of Revenues,earning per share and return on equity. The 14 year was theworst year for us because our stock price was very low, reachinga value of 27.94, this is because we got an eps and roe verylow, which made decrease our stock price value.

Trends in the company’s annual image rating

YEAR IMAGE RATING11 7412 7513 78


14 8215 7616 7917 8218 8719 8820 90

11 12 13 14 15 16 17 18 19 200102030405060708090100

Image Rating

IMAGE RATING

In the chart above we can see that our company has alwaysmaintained a good level of image rating, although we didn’tinvest in Corporate Citizenship and didn’t sell private label,but we were a company with an integrated strategy, which helpedus achieve high image because our shoes were of good quality andwe offer an acceptable prices. Analyzing the graph, we see thatour worst year in this aspect was the first year, but despitethat, we obtained a value above of investor expectation. Thenour image continued to grow until the year 15, which decreasedslightly because this year we did not sell anything in thesection of private label, but this decision did not affect us inour rating because we achieved the first place in this year. Inyear 20 we achieved our highest image rating that was 90 butthis was not sufficient to achieve a good overall score.

Trends in global unit sales (both branded and private label footwear)

GLOBAL UNIT SALES


YEAR BRANDED PRIVATE LABELINTERNET WHOLESALES TOTAL

11 271 4282 4553 93712 265 4227 4492 135913 443 4571 5014 132914 379 5913 6292 121415 424 6806 7230 016 520 6429 6949 34417 785 7217 8002 47218 1354 8665 10019 019 1328 8778 10106 48420 1372 10706 12078 1594

11 12 13 14 15 16 17 18 19 200

2000

4000

6000

8000

10000

12000

14000

16000

Global Unit Sales

PRIVATE LABELWHOLESALESINTERNET

About the Global Unit Sales, we can see that in almost everyyear we sold private label, except in the years 15 and 18, whichwere some of our best years in our period of play. In the earlyyears, due to our lack of investment were selling small amountsof internet, whosales and private label. Our best year was the20th year because we sold more production than in any other yearin all sectors (internet, whosales and private) gaining greatermarket power by investing as much as possible on advertising,getting good quality and low prices. In addition, it should be


emphasized that Latin America was the region with the highestproduction sold.

Trends in the company’s global market share

YEAR GLOBAL MARKETSHARE

11 16,60%12 16,60%13 15,90%14 19,50%15 15,70%16 14,89%17 16%18 18,09%19 18,20%20 22,50%

11 12 13 14 15 16 17 18 19 200.00%

5.00%

10.00%

15.00%

20.00%

25.00%

GLOBAL MARKET SHARE

GLOBAL MARKET SHARE

The Global Market Share depends on our unit sales, as seen inthe previous section, in the year that most we sold was in year20, so in this graph we can see that our biggest market sharewas also in year 20, which was our best year in this aspect. The


year that got the lowest market share was in year 16, reaching avalue of 14.89%. Also as explained in the previous section, itis added that the region in which we achieve a higher marketshare in Latin America was due to the low costs to be had, itcould be applied in a better way our strategy can put a lowerprices with a huge investment in advertising.

THE COMPANY’S PRESENT STRATEGY AND HOW ITHAS ENVOLVED

DJAM COMPANY followed the integrated differentiation cost-leadership strategy. In all the decision years we sold ourshoes in all the regions with good quality, increasing it everyyear, and accessible prices and trying to be different in oneaspect from others, always wanting to highlight.

We started selling the shoes with 7 stars only in North Americaand Latin America and the other two regions with 6 stars. Thenwent up the star, up to sell at the year 20, top quality shoesof 10 stars.

In the production, we try to invest in the compensation andproductivity of our employments, we payed incentives and upgradethe plant with the option D that is facilities upgrade to boostworker productivity by 25% in all the regions except LatinAmerica.

In the early years did not have a good performance, to the year14 got the lowest percentage of market share, so we try andsteal market increase, increasing advertising a significantamount each year up to the stop of 25000 dollars.

After 20 years of decision, we have implemented both plantimprovements available that could perform. In order to gain moremarket also increase the capacity first north america it was theregion in which we had a larger market in the year 14, theninflate in Asia because it was the region with lower productioncosts and prices we could lose more increasing production andincrease more demand in this region.


With the intention to reduce our costs, we created plant in theyears 17 and 18 in Latin America and Europe, because the cost ofshipping was expensive and taking plant in all regions we couldproduce more in each region without sending much production oneregion to another.

In the early years, for reasons that we as co-managers eitherdid not understand is the celebrity bet, I think it was one ofour main flaws, because we could have achieved a much higherparticipation rate in the beginning. We buy some celebrity, insome years not our first choice because the other companiesbetting more.

We made 3 bank loans to 10 years to build plants in Europe-Africa and Latin America and the upgrades of the plant; and alsohas participated in dividends to employees and bought shares.

With all this strategies used, we achieved the second place, wefail to be in the global top eps, or roe but we had a goodperformance and we stay 3 times in the first place. The bestearnings per share achieved were in the last year, the bestreturn on equity was in the year 16 and stock price was in theyear 17.

The credit rating and of the DJAM Company always was good alwaysA and also the image despite we invest a little in corporatecitizenship and don’t sell all the years in private label but weoffer the product with high quality and for this reason weachieved high image score.

DESCRIPTION OF:


a. Corporate Citizenship Strategy

In corporate social Responsibility and citizenship strategy weonly invest in two variables in all the decision years that weconsidered important to make, ethics training/ enforcement, butonly managers because we believed that was the necessary and wewant to save cost to improve in the other aspects and increaseour ROE and EPS; and in workforce diversity programs in order toimprove increasingly our image rating as enterprise.

b. Production strategy

Our production strategy is explained in each factor below:

Percentage of superior materials: we used high percentageof superior materials, and the last years were very highbecause we have shoes with 10 stars, but in the firstyears that we have under of 8 stars we used the limitpercentage of superior materials possible without loweringour star prevent desired.

Number of models: in all the years we have handled about100 models, because we had to offset the costs of havinggood quality with affordable price, if not our profitmargin would have been very small; only in the last yearas our last played card we reduce it to 50 models to lowerprices even more and be able to recover, increase marketand steal even more.

Enhanced styling features and TQM/Six Sigma QualityProgram: as we use few models, we try to pay the most ofthis element to continue to maintain the good quality andthe expected star we had to fulfil our integratedstrategy, for it to have few models we had to invest moreto achieve sell good quality shoes.

S/Q Rating of branded pairs produced: we begin in the 11year with 7 stars in North America, Latin America 6 starsand the others two regions with 2 stars, then graduallyevery year we increased the star and the price tocompensate and have higher profit margin. We finished thegame in all the regions except Asia Pacific with 10 stars.


Numbers of pairs to be manufactured: we increased ourcapacity in the both regions that we have available, andalso we created plant in Europe-Africa and Latin America.In all the regions we try to produce at maximum capacitydue to the higher production, lower costs were thereforewe produced an over time, although in some years we hadmany shoes in stock, and so the following year we decidedto send more to private label with low prices but notalways because we sold there.

c. Marketing strategy

Our marketing strategy consisted of a set of budget to attractcustomers, we offer shoes with high quality, we are based inintegrated differentiation cost-leadership strategy, so we hadto spend good advertising budget, buy celebrity in the regionswhere we had less participation, etc. We consider that weinvested very little in the early years in advertising andcelebrities bet not until the year 15 was very grave mistake.Also we focused in be different to the rest, so in some yearsDJAM was the only one that sold shoes with the minimum weeks ofdelivery time, then the other companies used the same strategy.

Celebrities:

As already mentioned, in the first four years not bet anycelebrity which cost us market power. From year 14 won twocelebrities and from there we had 3-4 celebrities anus to anus17 down to 2 celebrities and in the last year we could not winthe bet.To bet the celebrity we analyse the weights in each region thathad every celebrity, so we were betting more of celebrity inwhich we needed to increase sales, in which lowest participationrate had.This decision was not predictable, because we did not know howmuch bet the competitors, so we spend the budget for advertisingand other aspects necessary to attract consumers and ensure themarket.

Wholesale price to retailers:


It was very important to analyse the reports to consider theindustry and determine the price more competitive andappropriate that can increase our net profit per share and netincome.

Advertising Budget:

To the year 15 our advertising budget of 10000 did not risethough was increasing each year taking into account the boxprojections, except in North America, in this region we sentmore money because the quality was a star more and we had togive out more these shoes. From year 15 in which much qualityincrease in all the regions, we increase the advertising budgetto the fullest.

Mail-in Rebate Offer

On average we have remained in $3.00 per pair of this element,except the first years that we paid only $2.00.

Retailer Support:

This element is very important because let us increase our salesand have a high percentage of market share. In the last year wepaid more of this element except in North America that was inthe year 18.

Delivery to retailers:

Our strategy was to deliver our shoes in less time than theothers competitors, so would win our market power. In North America we distribute our shoes to retailers in only 2weeks except in the years 18 and 19, for this reason we had agood participation in this region. In the Europe-Africa regionhave changed the delivery of two weeks to three weeks and onlyin the year 16 send to a week. In Asia and Latin America thesame strategy, we have sent our shoes two to three weeks andjust two years 15 and 16 a week.In Latin America when we send to one week we lost because weasked for more shoes we offer.


d. Wholesale strategy

Our wholesale strategy was based in the same strategy to all theregions, follow an integrated strategy but depending on thecosts of each region implement the star and assign therespective price. To say that in all regions we used the samestrategy does not mean that the prices were the same, theadvertising budget or particular years the same star.

We are trying to reduce costs, so first we increased capacity inNorth America and Asia-Pacific; also we created plants and theother 2 regions in order to reduce cost from shipping.

We consider necessary to compensate the productivity of ourworkers, so we made the upgrades the option D in almost all theregions except Latin America due to already we had a goodperformance.

We gradually increase the features of remuneration and incentivefor workers. We prefer only sell in branded production in almostall years because in private label the other competitors soldwith very low prices and we did not compete because notgenerated profits.

In conclusion we focused on sell shoes with high quality andgood prices, few models but trying to incentive to workers andreduce the pairs rejected.

e. Internet strategy

In this segment we try to sell respecting the rules of internetsales, but the competitors always sell with moderate low prices,so as response also we began to reduce the price of internet.Always we sell with not free shipping, only in the years 13 and14 we sold with free shipping and our sales did not increase andhave low profits so we returned to sold with free shipping.


f. Private level Strategy

In this segment, the competitors mainly the company C, couldsell with very low prices so they monopolized the whole marketand other companies, including us we had the entire production,which is why we do not focus on selling to private label.

Only in Asia- Pacific we sold in private level in almost allyears despite we did not obtain good percentage of market share,because costs in Asia were low and we could lower the price muchbecause in private is basically price competition. We did notsell in the year 15 and 18 and in the year 14.

In North America we only participate in this segment in theyears 11, 13, 14, 19 and 20. In Europe- Africa we sold only inthe first four years and in the region Latin America sold in theyears 11, 12, 13 and 17 achieving to sell only in the first twoyears.

We send the production to private label once we completed thewholesale market project demand.

CLOSEST COMPETITORS

NORTH AMERICA

INTERNET SEGMENT


INTERNET SEGMENT - NORTH AMERICACOMPANY PRICE S/Q RATING

A 55,44 2B 54 4C 58,99 10D 58 10E 62,45 7F 59,86 9

WHOLESALE SEGMENT

WHOLESALES SEGMENT - NORTH AMERICACOMPANY PRICE S/Q RATING


A 41,88 2B 55 4C 45 10D 45,9 10E 48,65 7F 52,99 9


PRIVATE-LABEL SEGMENT

PRIVATE LABEL SEGMENT - NORTHAMERICA

COMPANY PRICE S/Q RATINGC 21,5 6D 22,78 6


EUROPE-AFRICA

INTERNET SEGMENT

INTERNET SEGMENT / EUROPE-AFRICACOMPANY PRICE S/Q RATING

A 55,44 2B 54 4C 58,99 10D 58 10E 62,45 9F 59,86 9

A


WHOLESALE SEGMENT

WHOLESALES SEGMENT / EUROPE-AFRICACOMPANY PRICE S/Q RATING

A 46,65 2B 55 4C 47 10D 46,63 10E 57,69 9F 52,59 9

F

E

A

B


ASIA-PACIFIC

INTERNET SEGMENT

INTERNET SEGMENT / ASIA-PACIFICCOMPANY PRICE S/Q RATING

A 55,44 2B 54 4C 58,99 10D 58 9E 62,45 9F 59,86 9


WHOLESALE SEGMENT

WHOLESALES SEGMENT / ASIA-PACIFICCOMPANY PRICE S/Q RATING

A 40,85 2B 51 4C 44 10D 43,99 9E 57 9F 48,9 9

F

E

A


PRIVATE-LABEL SEGMENT

PRIVATE LABEL SEGMENT / ASIA-PACIFICCOMPANY PRICE S/Q RATING

B 24,25 6C 21,5 6D 20,7 6


LATIN AMERICA

INTERNET SEGMENT

INTERNET SEGMENT - LATIN AMERICACOMPANY PRICE S/Q RATING

A 55,44 2B 54 4C 58,99 10D 58 10E 62,45 5F 59,86 9


WHOLESALE SEGMENT

WHOLESALES SEGMENT - LATIN AMERICACOMPANY PRICE S/Q RATING

A 40,85 2B 55 4C 48 10D 44,6 10E 47,63 5F 53 9


PERFORMANCE TARGETS FOR THE NEXT YEAR OR TWO

PERFORMANCE TARGETS YEAR 21 YEAR 22Earnings Per Share(EPS)

6,75 6,89

Return on averageEquity (ROE)

16 16,3

Stock Price 96,9 101Credit Rating A+ A+Image Rating 90 90

This table shows the predictions to age 21 and 22, in the event there are significant changes in the industry.

MOVES OVER THE NEXT SEVERAL YEARS TO WIN OUTCOMPETITORS, IMPROVE PERFORMANCE AND MARKET

STANDING

The moves that we would make over the next several years are:

Keep S/Q 10 stars Invest in marketing Increase prices Increase the number of models to 100 Bet on celebrities Expand Europe and Asia Producing more private label shoes


LESSONS LEARNED

NOTHING VENTURED, NOTHING GAINED To learn how it works in reality an industry. We

learned to adapt to the different variations can occurin the market.

Be more competitive Which do not read, do not learn Debts are good, whether to invest

DJAM

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