BSG Study Guide

What is important about sup. materials?

The use of superior materials improves shoe quality and performance, but shoes can be manufactured with any percentage combination of standard and superior materials.

What are the different options?

1. Reduce number of defective pairs 2. Reduce production run set-up costs 3. Boost S/Q rating by 1 star 4. Increase worker productivity

What are some factors affecting worker productivity?

Annual base pay increases Emphasis placed on incentive compensation total annual compensation Amount spent per worker on best practices training Plant option D # of models to assemble

What kinds of deciisons must be made?

ocial responsibility and citizenship, footwear production, distribution centers, sales and marketing efforts in each of the four geographic regions of the world market, and financing company operations.

What factors determine indepentent retailers taking your product?

(1) a company's prior-year market share of branded footwear sales in that region, (2) the maker's S/Q rating for branded footwear, (3) the manufacturer's delivery times in filling retailer orders, and (4) the degree of merchandising support that the company provides to retailers stocking its brand of footwear.

Plant capacity includes decisions for what?

(1) add new shoe-making capacity (by constructing new plants, expanding existing plants, or by purchasing used footwear-making equipment if any is available), (2) upgrade production features at one or more existing plants or (3) permanently sell-off all or part of the production capacity of an existing plant

What competitive factors drive sales and market share?

How a company's wholesale price compares to that of the country average S/Q Ratings Product line Breadth Advertising Mail-In Rebates Appeal of Celebrities endorsing Number of weeks it takes to deliver orders to retailers Amount of merchandising and promotion support given to retailers Number of independent retail outlets carrying the brand Effectiveness of the company's online sales effort Customer Loyalty

How were sales in year 10?

Sales volume in Year 10 equaled 5.2 million pairs, so there's no immediate urgency to add more capacity. In Year 10 the company sold 4.5 million pairs of branded shoes to retailers and individuals, and it bid successfully for contracts to supply 740,000 pairs of private label shoes to large multi-outlet retailers of athletic footwear.

What damages S/Q?

The IFF's S/Q rating formula calls for a 1-star reduction in the S/Q rating on all unsold branded pairs carried over in inventory to the following year

What does the overall market growth forecast look like?

The combined effect of these factors is reliably expected to produce 7-9% annual growth in global demand for athletic footwear for Years 11-15, slowing to about 5-7% annual growth during Years 16-20.

What is important with our stock and financial records?

The company's stock price has risen from $11.00 in Year 6, when the company went public, to $30 at the end of Year 10. There are 10 million shares of the company's stock outstanding. The company's financial statements are prepared in accord with generallyaccepted accounting principles and are reported in U.S. dollars.

Where are the dist. centers?

The distribution center for Europe-Africa is in Milan, Italy. The distribution center for the Asia-Pacific region is in Bangkok, Thailand. The Latin American distribution center is in Rio de Janeiro, Brazil, and the North American distribution center is in Memphis, Tennessee.

When are you subject to exchange rate adjustments?

The first occurs when footwear is shipped from a plant in one region to distribution warehouses in a different region

How do rates automatically change?

The going market prices of standard and superior materials in any one year deviate from their respective base prices whenever the percentage mix is anything other than 50% for standard and 50% for superior materials. AND Materials prices fall whenever global production levels drop below 90% of global production capacity and materials prices rise when global production levels rise above 110% of global plant capacity.

What are the ways of selling shoes?

Whole sale, Online sales, private label sales

Whats important about options?

You may undertake one upgrade option per year at a given plant, with a maximum of two upgrade options throughout the life of the plant.

What are your current plants?

a 2 million-pair plant in North America and a newer 4 million-pair plant in Asia.

Whats important about Tariffs?

currently average $4 per pair in Europe-Africa, $6 per pair in Latin America, and $8 in Asia-Pacific. However, the Free Trade Treaty of the Americas allows tariff-free movement of footwear between all the countries of North America and Latin America.

What do numbers in entry boxes represent?

either (1) the decisions made for the prior year or (2) the latest decisions you and/or your co-managers saved in the course of having previously worked on the upcoming year's entries.

How is labor productivity determined?

more by worker dexterity and effort than by machine speed; this is why piecework incentives can induce greater output per worker. Training production workers in the use of best practice procedures at each step of the manufacturing process has recently become important to minimizing the reject rates on pairs produced

What are the main factors causing competition in the industry?

pricing, styling and product quality, the breadth of product selection, celebrity endorsements, advertising, the comparative sizes of the footwear retailer networks rival companies have attracted to stock and merchandise their brand of athletic footwear, the amount of merchandising and promotional support provided to footwear retailers, mail-in rebates, the speed with footwear rivals deliver new orders from footwear retailers, sales efforts at company websites, and efforts to boost the loyalty of prior customers in making repeat purchases.

The more that a company's brand appeal to buyers on any one competitive factor is above/below the all-company average in a region, what?

the bigger is the weighting/impact of that factor in accounting for why that company's regional unit sales/market share is above/below the region's all-company average.

What are the three most important factors affecting buyer decisions?

the comparative prices, S/Q ratings, and breadth of product selection of footwear rivals

What decides the S/Q rating?

(1) current-year spending per footwear model for new features and styling, (2) the percentage of superior materials used, (3) current-year expenditures for Total Quality Management (TQM) and/or Six Sigma quality control programs, (4) cumulative expenditures for TQM/Six Sigma quality control efforts (to reflect learning and experience curve effects), and (5) current-year expenditures to train workers in the use of best practices.

What are some current possibilities?

(1) intense competition among rival footwear companies (in the form of declining prices, higher footwear quality, and so on) can spur market growth above the projected levels or (2) weak competition (in the form of rising prices, subpar footwear quality, and so on) can produce weaker thanprojected rates of market growth

What are the region specific determinants?

(1) the S/Q rating of the pairs available in each region's distribution center, (2) the company's current advertising budget in the buyer's geographic region, and (3) the appeal of the company's celebrity endorsers in the buyer's region.

How can a company's strategy yield good results?

(1) the company's products offerings are very competitive with the offerings of rivals and (2) the company is operated so cost effectively that revenues exceed costs by an appealing big amount.

What are the global determinants of the effectiveness of the online sales effort?

(1) the number of different models and styles offered at the Web site, (2) the company's internet sales price for these models, and (3) whether shipping fees are added to the buyer's cost of the footwear purchased online or whether the company offers free shipping

How are material prices decided?

By instructor or the prevailing base prices are adjusted up or down according to the percentage mix of standard-superior materials usage and the strength of demand for footwear materials

How can models and sizes be delivered?

Each distribution center maintains sufficient inventory of each model and size to enable orders to be delivered within 1 to 4 weeks from the time the order is placed. You and your co-managers will decide whether to staff for 1-week, 2-week, 3-week, or 4-week delivery to retailers.

What kind of discounts are avalible?

Retail markups over the wholesale prices of footwear manufacturers can run anywhere from 40% at discount chains to as high as 100% at premium retailers. Thus, a pair of shoes wholesaling for $50 usually retails for between $70 and $100.

How can capacity in a plant be expanded?

The maximum amount that an existing plant can be expanded in any one year is 50% of existing plant capacity—all plant expansions must be in increments of 100,000 pairs.

What are private labels attractive?

The private-label segment is projected to grow a healthy 10% annually during Years 11-15 and a brisk 8.5% during Years 16-20 and Making private-label shoes for chain retailers allows a manufacturer to use plant capacity more efficiently.

What factors are 100% competition based?

Unit Sales and Market Share Outcmoes