Running head: FINAL COMPANY PROJECT
Final Company Project
Obie Evans
Strategic Management/Southwestern College
Arthur Smith
September 29, 2013
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Abstract
The strategic vision guides an organizations actions over a period of time. There are certain
aspects of the vision that makes it strategic, such as the how a company will attract customers.
Planetary Kicks used a differential strategy to attract its international sales. Planetary Kicks did
make most of its performance targets for EPS, ROE, Credit rating and image ratings and
established its targets for the next two years. Planetary Kicks competitive strategy was to use
celebrities to endorse its high quality product in branded label sales. Planetary Kicks did not
have a strategy to compete in the private label segment because it did not align with celebrity
endorsements and more shoe production was used for branded sales. Planetary Kicks production
strategy was to pay workers well as to promote quality footwear production and the company did
not pay dividends until the last few years of the competition. The main competitor to Planetary
Kicks was Vital Essence in branded footwear. Production capacity was built to try and compete
with Vital Essence in the simulation but Vital Essence came in first at the end of the simulation.
One of the lessons learned during the simulation not to stay stagnant when competing with close
rivals.
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Introduction
During the simulation years, Planetary Kicks enjoyed successful EPS, ROE, Credit
Rating, and stock price but may have come short of the 3-yer strategic plan than was created in
year 14 of the simulation. This paper outlines the competitive strategy that was employed for
branded and private label shoes. Also discussed are the shoe production, worker compensation,
and the finance strategy of C company. Finally Planetary Kicks’ rivals are identified, strategy
used to compete against them and the competitive moves that would have been used against
them in the next two years of competition.
Strategic Vision
The strategic vision for Planetary Kicks is strategic because it displays many of the
elements that define the word strategic. The strategic vision statement is “In five years o target is
to become the leader of the Internet and wholesale athletic shoe industry. Of the four major
continents that we serve, we aim to see at least one pair of out shoes in every household. Without
compromising on the quality of our shoes, we also will become leaders in the support of our
global work industry, community and environment. Our quality and selection of shoes will lead
the way” (Thompson, Stappenbeck, Reidenbach, Thrasher, Harms, 2013). How to attract and
please customers is one of the elements of strategy. Planetary Kicks will attract customers with
quality and selection along with celebrity appeal. My company will gain the competitive
advantage with high quality shoes and the most selection in the industry. My company should
outcompete rivals based on our differential strategy of robust celebrity endorsement of our
Internet and wholesale brand of shoes. The celebrity endorsements will lead to a brand appeal
status that no other company can compete with. Celebrity endorsement has been established as
one of the most popular tools of advertising and is seen as a winning formula for brand building
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(Mukherjee, 2009). A “Be Like Mike” approach is a good example for advertising with
celebrities.
There lie some aspects to competing globally using this marketing and advertising model
of using celebrity appeal as a main part of company strategy. When competing globally,
acknowledgement of major differences in culture is vital (Schuster, Copeland, 2008). Each
region’s consumers will not be affected the same by one celebrity. Knowing the relative position
of each country toward each celebrity’s appeal allows for selective decision making when
determining which celebrities to offer contracts. Each celebrity that could be signed to a contract
was rated in each global region.
Planetary Kicks needed was strategic when determining which celebrities to hire to contracts as
we could not sign them all. Our strategy was to sign celebrities with higher numbers across the
four regions to more expensive contracts (Oprah Letterman 85,70,65,75) in order to gain the
contract (Thompson, 2013). As the simulation progressed part of our strategy was to also try to
sign celebrities to minimum contracts. This allowed signing of more celebrities using minimum
funds to raise celebrity appeal globally.
EPS, ROE, Credit Rating
The some of the targets for Earnings per share (EPS), Return on Equity (ROE), stock
price and image rating that were expressed in the three year strategic plan fell short. The target
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for the EPS was met in year 15 (planned 8.75, achieved 9.04) and 16 (planned 10.00, achieved
10.26), but was not met in year 17 (planned 13, achieved 11.35) (Thompson, 2013). For the next
two years the EPS performance target will be scaled back. No new capacity was ordered in year
17, so the EPS performance target will be modest for year 18 and 19, at 11.95 and 12.25.
Without any new capacity for producing more brand name and private label shoes, Planetary
Kicks will keep about the same international market share, which will prevent any large increase
in EPS. Consumer demand for branded shoes and industry demand for private label shoes will
allow for a small increase (Thompson, 2012).
Return on Equity (ROE) targets expressed in the 3 year strategic plan fell way short in
year 15-17. The 3 year strategic plan targets were 28%, 29%, and 30% for years 15,16,17,
respectively. The actual scores for year 15-17 were 22.6, 20.9, and 20.8 (Thompson, 2013).
New capacity of 1000 was built in year 13, and capacity available for production in year 14.
Sales of this new capacity caused a jump in ROE to 27.5 in year 14. In year 15, increased
investments in corporate citizenship and the environment, as well as increased competition from
rivals caused actual ROE of 22.6 to fall from previous year. This did not meet expected strategic
target of 28% for year 15. Although new capacity was added in year 15 for year 16, stronger
competition from rival companies kept ROE increases modest and well below expectations from
3 year strategic plans in years 16 and 17. For years 18 and 19, the targets will be kept at the
same level as the two previous years, at 20.9 and 21, as no new growth in the company capacity
was ordered (Thompson, 2013).
Planetary Kicks achieved and maintained an A+ credit rating since year 13, and met the 3
year strategic plan performance targets for years 15-17. The target for the next two years will
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remain the same, and Planetary Kicks is a low default risk and for year 17 has the best in
industry “Default Risk Ratio” of 18.45 (Thompson, 2013).
Planetary Kicks image rating did not meet expectations in year 15, as target was 80 but
only achieved 77. The target was exceeded in year 16, as target was 84 and actual rating was 87.
In year 17 the actual fell short at 84 as the target was 87. Increased spending on product quality,
social responsibility and green energy initiatives planned for the next two years will increase
image rating. Targets for the next two years will sit at 87 and 90 (Thompson, 2013).
Planetary Kicks stock price did not meet strategic plan targets for years 15-17. Actual
stock prices were 172.05, 200.98, and 216.38. The strategic plan targets were 225, 250 and 275.
Company growth did not occur fast enough to achieve these goals. Since no capacity was
ordered for year 18, growth for the company and stock price will not increase as the two previous
years. Also, there is no plan to buy back stock in the next two years so targets for stock price
will be 220.25 and 225 (Thompson, 2013).
Branded Footwear Strategy
Planetary Kicks initial strategy in the branded footwear industry was to position itself
into the best cost provider position while also providing a wide selection of shoe models. This
strategy was used for Year 11, as Planetary Kicks provided a 6-S/Q rated shoe in all regions. In
the North American region, the shoes were sold at 52.00, priced between the lowest prices, 45.00
with a 4 S/Q rating, and the highest 59.99 with a 7 S/Q rating. In the Europe-Africa Region,
Planetary Kicks price was 51.00, the lowest was 45.00 and the highest was 54.99. In the Asia
Pacific region, our price was 46.00, and the lowest was 41.00 and the highest was 49.99. In the
Latin America region our price was 47.00 as the lowest price was 42.00 and the highest price
was 49.99. In year 12, Planetary Kicks added more models to choose from, moving from 200 in
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year 11 to 248. The S/Q rating globally remained at a 6, as the highest SQ rating globally
remained at 7. In North America the price remained between the highest 55.00, and the lowest
48.00. In Europe-Africa, the lowest price was at 48.00, the highest was 54.99 and our price sat at
51.00. In the Asia-Pacific market. Planetary Kicks offered shoes at 46.00, while the competition
offered shoes at a low price of 41.00 and a high price of 51.00. In Latin America the prices
ranged from 42.00 to 50.00 with our price right at 47.00 (Thompson, 2013).
For two years Planetary Kicks employed this best-cost strategy. In year 13, best cost was
abandoned because the best cost strategy is difficult to manage as low cost competition can catch
up and high end competitors may be able to steal customers with better attribute of its products
(Thompson, 2012). Planetary Kicks decided to move into a strategy of differentiation. Our
company would differentiate itself by providing quality shoes and gaining the most celebrity
appeal and endorsements in the industry. Using celebrities as endorsers of products allows
connections between customers and the Planetary Kicks brand (Ilicic, Webster, 2011). We
noticed in year 11 and 12 that the competition put little or no effort in gaining celebrity
endorsements to increase the appeal of their shoes. Our differentiation strategy would become
making a wide variety of quality shoes, with the most celebrity appeal of any company. For
branded models in year 13 and 14, our S/Q rating was on par with the highest in the industry.
Our celebrity appeal became the industry leader in two regions of the world in year 13, and was
the leader for celebrity appeal in years 14-17. Planetary Kicks was in the top three for global
branded shoe market share for years 13-17, even though our company did not have the cheapest
price or the best quality shoes, or the best incentives such as higher rebates. Planetary kicks
competitive strengths globally for years 13-17 became S/Q rating, models offered, advertising
and celebrity appeal (Thompson, 2013). Celebrity endorsements were a vital part of the yearly
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strategy decisions. A main decision to be made each round was which celebrities were needed to
gain more brand appeal in each region of the world. If sales were lacking in one region, our
company would try to gain contracts with celebrities with more appeal in that region. Gaining
celebrity contracts became one of our main business objectives as our main strategy centered
around celebrity appeal in the sale of shoes.
Planetary Kicks did supplement this strategy by initiating offensive and defensive moves.
Offensively, we tried to gain celebrity contracts that ended with other companies that would
benefit our company in certain regions. In the year 16 Footwear Industry Report (FIR),
Planetary Kicks had five celebrities on contract and celebrity appeal ranged from 300 in the
Europe-Africa region to 350 in North America (Thompson, 2013).
Defensively and offensively, Planetary Kicks built production capacity in year 13 and 15 to try to
stave off competition from gaining its industry market share and gain new customers as demand
was increasing 7-9% in years 11-15 in the branded wholesale segment (Thompson, 2013).
Private Label Strategy
Planetary Kicks did not employ a strategy for the private label industry as the focus was
on branded footwear and Internet sales. If capacity was left over after the demand for branded
footwear was filled, then private label production was offered. The private label segment’s main
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concern was price first, along with the minimum S/Q rating. This did not align with our
company’s main strategy, as celebrity appeal was not a factor in private label sales. As a result,
private label sales were offered by Planetary Kicks only after the wholesale segment demand was
filled completely.
Production and Work Force Compensation
As part of the Planetary Kicks strategy to produce high quality shoes, the company
invested in increasing the percentage of superior materials, enhanced styling, and in the
TQM/Six Sigma Programs. The number of shoe models offered by my company was also higher
than the average number of models offered industry wide for years 11-17. The percentage of
superior materials was increased to an S/Q rating of 6 in years 11 and 12. Superior materials for
shoes were again increased in year 13 to move our branded segment shoe to a S/Q rating of 7.
This S/Q rating was maintained to year 17, as the 7 star rating was still above the industry
average for the wholesale segment for years 13-17, and just one star below the industry leader in
year 17. The number of shoe models that were produced was increased to 250 from both the
North American and Asia-Pacific plants in year 13, which was an average of 40% higher than
the industry average for all regions years 13-16 (Thompson, 2013).
In year 14, as part of its 3 Year Strategic Plan, Planetary Kicks strived to become one the
industry leaders in support of its global work force. Planetary kicks provided the highest worker
total compensation of any competitor regional plant from years 15-17 (Thompson, 2013).
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Planetary Kicks actions support its strategy for its global work force compensation.
Finance Strategy
Planetary Kicks finance strategy was to only use funds that were available year to year
unless construction was needed. My company did not issue any more stock in order to raise
more funds and worked with the funds that were available from current years shoe production
and sales for plant upgrade options. Planetary Kicks also did not repurchase any stock in the first
3 years of operation in order to hold back funds for operational purposes. A small dividend of
.25 was issued in year 15, as most funds were still being used for growth for the company. A
larger dividend of 1.00 was issued in year 16. The largest of dividends, 4.00, was issued in year
17 as no new capacity was bought and more revenues were being generated but was not the norm
for yearly dividends for my company. As larger revenues are generated by more sales, larger
dividends will be issued, but the minimum dividend for the next two years would be 1.00. Debt
was not used until more production capacity was needed as the industry wide demand increased.
Loans to build capacity were financed at 50% of the cost of the construction. The other 50% was
financed with cash. Planetary kicks waited to achieve an A+ credit rating before borrowing any
funds (Thompson, 2013).
Competition
My closest and strongest competitor was Company E, Vital Essence. Vital Essence was
the closest competitor in S/Q rating of shoes, shoe production worldwide, and market share.
Vital Essence led the industry in S/Q rating and shoe production, and in year 16 Vital Essence
had taken over market share in the Internet and wholesale segments in all four regions. Vital
Essence also constantly competed in the private label market every year in all regions, as
Planetary Kicks did not. Vital Essence grew its production capacity faster than Planetary Kicks,
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which provided more funds faster to reinvest into its operations. Vital Essence also concentrated
its production of shoes to the Asia-Pacific region, since shoes were cheaper to produce there.
From the year 13 FIR to the year 17 FIR, Vital Essence was first and Planetary Kicks followed in
second. No other companies came close to Vital Essence and in EPS, ROE or stock price and
Planetary Kicks trailed Vital Essence in all three categories.
In order to out compete Vital Essence in the next two years Planetary Kicks would need
to aggressively build more capacity in the Asia-Pacific region. The maximum production
capacity would have to be built in the next two years to compete head to head with Vital
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Essence, along with increasing the S/Q ratings of its shoes to near the 9 rating that Vital Essence
achieved in year 17 (Thompson, 2013). Planetary Kicks would also have to compete more in the
private label segment in order to drive up the revenue for the company. Planetary kicks would
also continue its strategy of signing more celebrities to add more appeal to its shoe lines.
Lessons Learned
One of the lessons learned about crafting a winning strategy would be that strategies can
be tweaked even after implementation. Planetary Kicks started with a best cost strategy but then
tweaked the strategy to a differential strategy after focusing in on what would work better for the
company. If a company is to be financially and competitively successful in a head to head battle
against other shrewdly managed companies then the manager should not let the company remain
stagnant at any time. In some years Planetary Kicks did not make any special operational moves
like building capacity or raising S/Q rating. This may have caused the company to lose market
share.
Summary
Strategy drives the course of an organization. Planetary Kicks strategic vision was used
to develop its competitive strategy in branded and private label sales of shoes. EPS, ROE, and
stock price were a good representation of the strategy that was employed, even though some of
the numbers fell short of the targets identified in the 3-year strategic plan. As part of the
strategic vision, the production, worker compensation and company finance strategy was also
created. Planetary Kicks biggest competitor employed a different strategy and was more
successful. Planetary Kicks outlined the moves that would need to be employed in the next two
years in order to catch its main competitor. While competing in the business strategy game there
are some lessons learned that were also shared.
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References
Thompson, A. A., Stappenbeck, G. J., Reidenbach, M. A., Thrasher, I. F., & Harms, C. C.
(2013). The Business Strategy Game: Competing in a global market place. Retrieved
from http://www.bsg-online.com/
Thompson, A. A. (2012). Strategy: Core concepts and analytical approaches. Retrieved from
http://www.bsg-online.com
Schuster, C. P., & Copeland, M. J. (2008). Cultural theory in use: the intersection of structure,
process and communication in business practice. Journal Of Public Affairs (14723891),
8(4), 261-280.
Thompson, A. Strickland A. Gamble J. (2010). Crafting and Executing Strategy.
New York: McGraw-Hill Irwin
Ilicic, J., & Webster, C. M. (2011). Effects of multiple endorsements and consumer celebrity
attachment on attitude and purchase intention. Australasian Marketing Journal, 19(4),
230-237. Retrieved from
http://ezproxy.sckans.edu/login?url=http://search.proquest.com/docview/899259609?acco
untid=13979
Mukherjee, D. (2009). Impact of celebrity endorsements on brand image. Rochester:
doi:http://dx.doi.org/10.2139/ssrn.1444814