1.

Review key quantitative and qualitative performance indicators:

1.1

Profitability.

After a record earnings year in 1994, Margaret and Anthony realized that the market was shifting. They were beginning to lose sales to foreign companies who were introducing low cost, good quality, and stylish hiking boots. At the time of this case, Cima Mountaineering had already lost two key retailers, and sales revenues were beginning to level off. Business is making profits, and to make profits, a business must take a certain amount of risk. Hopefully, in the long run, that risk is minimized, and profits that once seemed unreachable are the entire sudden true. Cima is making profit as shown in Figure 2, the net profit at 1995 reached 857,134$ while at 1994 it was 809,505$ which means increasing 5% net profit. 1.2 Growth.

While growth through the late 1980s and early 1990s was quite good, recent market studies showed that there were untapped market segments with very attractive. The next five years were marked by growth, innovation, and increasing foreign and domestic competition. Market growth continued as hiking boots became popular for casual wear in addition to hiking in mountains and on trails. As the company ended 1995, sales had grown to $20 million, up 7.2% from the previous year. Employment was at 425. And the facility was operating at 85% of capacity, producing several styles of mountaineering and hiking boots. Time saving innovations and cost reduction also had worked, and profits reached an all time high. 1.3 Market share.

The company market share is growing and still growing to reach different segments and categories, as Mountaineers, Serious Hikers, Weekenders, Practical Users, Children and Fashion Seekers.

1.4

Customer satisfaction and loyalty.

Cima implemented a computer aided design (CAD) system in 1993 to shorten product development and meet the tough competition that arisen from its direct and indirect competition, thus, need to devote more attention to design. The company switched from a production line to a system in which a work team applied multiple processes to pair of boots.

1.5

Brand equity.

As Anthony reviewed the marketing study commissioned by Harris Fleming, his attention focused on the market segmentation. The company brand equity is higher than expected due to increasing demand and shift in consumers' tastes.

1.6

Process efficiency and effectiveness.

The next five years were marked by growth, innovation, and increasing foreign and domestic competition. Cima and its competitors began to make boots with modeled footbeds and utilize materials and on trails. The company switched from production line to a system to encourage and increase its line efficiency and effectiveness using high advanced technology and techniques that helped the company to position itself among its competitors.

2. Identify performance gaps; given the company vision/long term goals. Basically, a performance gap is the difference between the actual or present performance and the optimal or future performance:

The company performance gaps are very clear, due to increasing number of sales and increasing amounts of profits, achieves higher rate of performance gap.

3. Identify performance drivers, i.e., factors that lie behind performance gaps and are likely to be the levers used to fill the gaps.

Fashion also became a factor, and companies like Nike and Reebok marketed lightweight boots in a variety of materials and colors to meet the demand for styling in addition to performance gaps.

4. Review key environment trends and their likely impact on company performance.

This unique and special industry consists of a multitude of footwear manufacturers, wholesalers, and retailers. The major wholesalers are owners of a brand name and typically source
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their shoes from independent manufacturers. The retail segment of the industry ranges from owners of large multinational chains to small local businesses. Many shoe companies operate in both the retail and wholesale arenas. Shoe companies covered by Value Line generally adhere to the standard industrial page format. There are some key environment trend that impact the company performance; these factors are: 1. Competitive Landscape Taken as a whole, the Shoe Industry could be described as mature. However, barriers to entry are far from insurmountable. Since demand is largely driven by fashion and demographics, newcomers with a hot product may thrive at the expense of a fading rival. Indeed, the profitability of individual companies depends on their ability to design attractive footwear lines and remain at the forefront of consumers' consciousness. 2. Product Innovation Due to rapidly changing tastes of shoe buyers, it is important for shoemakers to continually offer better and bolder product lines to catch the consumer's eye. For the athletic shoe companies, this largely means improving comfort and performance. In the dress and casual markets, it means offering smart, fashion-forward designs. Superior products also command higher price points, improving profitability. That said, the worst thing a company in the shoe industry can do is expect to coast by on the back of a few successful product offerings as the rest of the market passes it by. Even though this can lead to great short-term growth, it is not a recipe for long-term sustainability. The success of a company's product offerings can generally be gauged by the following performance metrics. 3. Important Metrics For shoe retailers, comparable-store sales is a key measure of revenue performance. Although this statistic is not displayed as part of our numerical presentation on the Value Line page, it is often referenced by analysts within the stock commentary. This metric measures top-line growth at the existing store base over a set period of time, usually on a quarterly or yearly basis, rather than including newly opened locations. Healthy same-store sales gains indicate that the retailer is successfully stocking desirable products and provides meaningful insight into future earnings performance. Although retailers face high fixed costs related to rents and
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inventory, strong comparable-store sales growth will dilute the impact of these expenses and improve operating leverage. Inventory levels are also of particular concern. Inventory growth is positive, if it is paired with an increased market presence. However, it may mean a sharp decline in profitability is at hand, absent a corresponding rise in the store count/distribution footprint. Retailers that misread market dynamics and order excess product often face the prospect of deep discounts, depleting profits. The same can be said of wholesalers that overproduce footwear without a corresponding retail market. 5. Conclusion: strategic issues/ questions that need management attention and resolution.

Companies within the Shoe Industry are impacted by a variety of factors, from the macroeconomic environment to fashion trends within particular footwear categories. That said, investors should pay close attention to same-store sales and margin trends, as well as inventory management. The companies that succeed in these areas tend to be the best run and, thus, are more likely to stay ahead of fashion trends and remain competitive in the marketplace. Strong brand recognition is another factor to take into consideration, as these names are more likely to resonate with consumers when faced with similar product offerings. SWOT analysis: STRENGTHS Test hiking boots on trails Discuss marketing strategies to increase profits and increase sales Sales & Profits have grown steadily Anthony & Margaret (owners) grew up learning the boot business Quality emphasized throughout product line Each line has different styles & features to cover many of the important uses in the market

WEAKNESSES Growth has slowed down as a result from foreign competition & a changing market Market wants more casual, stylish boot for weekend hikers Not much modification to the current boots Decided not to use mail order catalog companies

OPPORTUNITIES Market wants more casual, stylish hiking boot for a variety of uses Ideas to extend the line & expand distribution Make boots at lower prices Light weight hiking boot for less experienced hikers

THREATS Risk in new line of boots New boots = new set of marketing, competitive issues, and financing a new line Asolo, Hi-Tec, Salomon, Raichle, Reebok, Nike, Vasque, and Merrell Rocky Mountain Sports & Great Western Outfitters dropped Cima and picked up their competitors (more to come?!) 6. Problems: with analyzing the company, there are several factors that arise in the company environment, they are: a) b) c) Distribution Price Competitors a. b. d) e) Foreign Domestic

Promotion Slow to moderate market growth

Distribution Currently, Cima boots are only distributed in Western Canada and the Western United States Only sell in 10 states in the US

 Cima Mountaineering only sells their boots to retailers that specialize in mountaineering, backpacking, and hiking equipment Do not use catalogs Do not use sporting goods chains Do not use internet

Competitors Foreign Foreign companies exporting their boots aggressively into the United States Asolo, Hi-Tec, Salomon, Raichle marketed on performance and reputation, usually to the mountaineering serious hiker and weekender segments of the market Domestic Vasque and Merrell market boots that compete with Cima, but are offering products for segments of the market where prospects for growth are better Reebok and Nike new entry to boot market-appearance and durability of hiking boot with the lightness and fit of athletic shoes-- expanding into markets that demand lower levels of performance

Price Current prices are too high to reach some of the market Losing retailers due to high prices Great Western Outfitters replaced Cima with Merrell due to customers asking for lower-priced boots

Promotion
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Cima needs to expand their promotion techniques Personal selling Print advertising Trade shows Point of sale displays

Only have 10 sales reps All independent and sell complementary equipment

Print advertising is only placed in backpacking magazines Summit, Outside, Backpacker

Slow to moderate market growth Mountaineers only make up 5% of the market share and are seen as having slow growth Serious hikers make up 17% of the market share and are seen as having moderate growth They are in no high growth markets and only reach 22% of the boot market

7. Solutions: what can be done about the key issues. Business is making profits, and to make profits, a business must take a certain amount of risk. Hopefully, in the long run, that risk is minimized, and profits that once seemed unreachable are all the sudden true. This mere set of statements really sum up who I agree with. Margarets idea is both daring and risky, taking into account the fact of established players in the market, and the amount of head
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start they already have on Cima. While her idea is quite risky when you look at it (no equipment or experience in making the kind of boots to sell) and the time to market being probably 6-12 months away assuming fast turn around, and you have yourself some major risk. At the same time, I look at Anthonys idea, and I also see great risk, in taking such a small risk. If his idea pays off, truly he is creating a low cost segment in the market that Cima is already in. If he fails, they are even more behind everyone else, and no time to spare trying to build and chip away at the big boys market share. So I need to recommend a solution to this small, but all to important problem. The numbers are all there. Each shows demand, each shows promise, but with no guarantee of succeeding in bringing in the profit. The company really has been at the high end of the hiking segment, selling professional level shoes. This gives them a bit of help in that segment (niche? Its pretty smallonly 13 million in revenues). But Margarets targeting your ultra hip people looking to by, the casual person. Anthonys trying to pull more people into the high end, by offering smaller steps to the best boots. Margarets idea falls prey to their current distribution chain, with specialty stores buying most of their stuff. Anthonys idea is a little better off, but again, his segment is to pull people in, and at specialty stores, youre not necessarily pulling in new people. 8. Recommendations: After closely examining this case, I have decided that it would be in the company's best interest to go forward with the lines extension of the existing boots for mountaineers and hikers. This option seems to yield a higher return in profits than the other alternative. Introduce a less expensive, more versatile Cima Weekender boot Lightweight, comfortable, durable, versatile Young to middle aged men and women

Recreational hikers, enjoy outdoors and spending time with friends and family Price range ($80-$100)

Benefits
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Appeal to a new target market High potential for growth Low prices while maintaining quality Expand distribution Increase product distribution of all lines

Expand throughout the U.S. Expand to chain sporting goods stores Distribute through mail order catalogs Distribute through internet Allows customers to order on company website Allow customers to order through retailer websites Increase Promotion Advertise on internet Create website Have list of retailers that sell Cima products Hiking Websites Trail Websites Retailer Websites Expand to family-oriented & health magazines Alternatives: We Chose not to expand existing boot lines Smaller target market Mountaineering and serious hikers only make up 22% of the boot market Weekender boot market makes up 25% of the boot market Less growth potential Mountaineering is a low growth market Serious hiker is a moderate growth market Weekender is a high growth market
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Already have multiples styles in those brands Have three mountaineering styles Have 5 serious hiker styles

If weekender brand proves successful, they can always expand their existing boot lines in the future

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