Exotic ShoesCompany

Report

Financial Performance

(7 Year Trends)

Net Revenues

Global Unit Sales (Branded and Private-Label)

Global Market Share

Earnings per Share (EPS)

Return on Equity (ROE)

Stock Price

Credit Rating

Image Rating

Strategic Vision

Our strategic vision for Exotic Shoes was to develop and produce footwear to meet the

demands of an array of consumers with appealing attributes including style, quality and

a arrange of selection at a lower cost than rivals.

We believe the targets above are reasonable based on our performance during the last 7 years. Our projection of increasing net revenues will help us achieve investor’s expectations for ROE & EPS.

Our global market share for wholesale is currently 26% as our internet sales has been a weakness of Exotic Shoes. Last year, we did lower our price in order to be more competitive online, which should increase our global market share.

Performance Targets (2018-2019)2017 2018 2019 Comments

ROE 13.4% 15.0% 17.0% 12% increase per/yr

EPS 5.14$ 5.40$ 5.65$ 5% increase per/yr

Credit Rating A A A Maintain credit rating

Image Rating 69 72 74 More style/quality @ lower cost

Stock Price 61.07$ 70.23$ 80.76$ 15% increase per/yr

Global Market Share 19.2% 22.1% 25.4% 15% increase per/yr

Best Value Strategy S/Q rating: invested in superior materials

(70%-80%), enhanced styling and features, continuous improvement, training and pay incentives

Strong Retail Partnership: major investment in sales support and quick delivery times

Low-Cost Structure: kept labor costs low by manufacturing in Asia and Latin America and kept warehousing cost lowest in the industry

Strategy for Branded Sales

Started with 5 SQ rating and incrementally increased to 7 SQ rating

Major investment in advertising and celebrity appeal to establish a strong brand name worldwide

Sold plant in NA and opened plant in LA, where

production costs were more favorable

Decreased our on-line price in the last two years to

$69.00 as we anticipated an internet pricing war

Evolution of Branded Strategy

Our strategy for private label was not a major part of our sales strategy but it was carefully utilized to take advantage of excess capacity allowing Exotic Shoes to spread overhead costs and maintain a low cost structure

We started the first few years bidding consistently but then changed our strategy to only sell private-label when we anticipated a good bidding opportunity as a reasonable profit margin

Private Label Strategy

Production: Used a higher % of superior materials (70-85%) Gradually increase in style/features up to $32K Consistently spent around $1 per/pair on TQM Every year used many combinations to create 7

star quality at the cheapest cost

Work force: To encourage worker productivity, we increase

base salary by 2-3% in Y11 – Y15 We offer competitive incentive pay $1 - $1.25 We increased best practices training from $1M

to $1.3M over the seven year period

Production & Work Force Strategy

Used 90% of long-term debt to finance expansion New plant in Latin America Increase capacity in Asia-Pacific Tax advantage on interest paid In Y17, we paid back several loans to achieve “A”

credit rating

In Y16 and Y17, we re-purchased 2.5 million shares when our stock was at its lowest point Increased our stock price to $61 in Y17 due to less

supply and higher demand for our stock Stock price increased larger due to our operating

results

Finance Strategy

After Y11, we eliminated any dividend payouts We invested our profits to assist with expansion Our competition was not offering any dividends

Our projection for Y18 and Y19, we would consider paying a small dividend based on Our operating performance What are competitors offering as a dividend

Based on our EPS targets, our projection would be to offer $0.25 in Y18 and $0.50 in Y19 if our company targets are reached

Dividend Policy

Team C was our strongest competitor in both the branded and private label segments worldwide

Team D would be our second closest competitor, however they are beginning to sell very high-end footwear and are targeting a smaller share of the market

Strongest Competitors

Company E – North America

Company E – Europe

Company E – Asia

Company E – Latin America

Company C – North America

Company C – Europe

Company C – Asia

Company C – Latin America

To outcompete Team C in the next 2 years, we would need to do the following:

Significantly increase investment into advertising with the exception of Latin America. Team C invested more money in every other region than our company did last year.

Significantly increase the number of endorsement deals that we execute. In the last year, Team C had 5 deals in place, whereas we had 2.

Branded Footwear

To outcompete Team C in the next 2 years, we would need to do the following:

All companies were making the same quality shoes and created a pricing war. The concern is that if you bid too low, you can take a loss on the cost of production.

To out compete Team C, we should implement a strategy of producing a slightly better quality shoe (S/Q 5). This will creating a new pricing dynamic. We can be more aggressive in our pricing. This should result in increased sales.

Private Label

The following are the lessons learned on how to compete and succeed in this game

Develop a company identity. Do you want to be high-end brand, low end brand etc.

Develop an Operating, Sales and Advertising strategy for how you intend to achieve the identity that you’ve identified

Stick to your strategy! Be who you are!

Do not make sudden and drastic changes to your approach. Make minor adjustments based upon the threats presented by your competitor

Lessons Learned