BSG

PumKash
India Ali, Tamira Conner, Alyssa Moore, Nenna
Olu, Stacy-Ann Telfer

Strategy
Implemented Best Cost Strategy to achieve our company vision and also aim to stay
above or maintain investor expectation in terms of earnings per share, return on equity, stock
price, credit rating or image rating within this footwear industry. PumKash provides low-cost
quality products with a focused strategy aimed at gaining sales and market share in a particular
geographic region. Our main competitive efforts were focused in North America, with plants
operating in Asia-Pacific and Latin America.
In order to implement the Best Cost Strategy strategy it was important for us to reach out to large
number of customers. Thus, we decided to make optimum use of all our retail outlets in order to
spread out our product to a larger consumer base. However, we focused too much on best cost
was unable to offer more models to our consumers. Initially, we were above industry average
with the number of models being offered , however in Year 14 we feel behind considerably and
did not increase our models until Year 18 and we were still at least 8% below industry average.
Wholesale Segment

PumKash Price vs. Industry

$58.00
$56.00
$54.00
$52.00
$50.00
$48.00
$46.00

Industry
Average
PumKash
11 12 13 14 15 16 17 18

PumKash Mkt. vs. Industry

30%
(
%

20%

PumKash

10%

Industry

0%
11 12 13 14 15 16 17 18
Years

Maintain the lowest price in the

industry overall to retain market
share. Maintain 15% or more market
share in North America, Asia/Pacific,
and Latin America each year.
Maintain highest celebrity appeal in
target regions. Remain top three in
advertising expenses.

Internet

Maintain internet market share at 20% or higher. Stay price competitive relative to industry
staying at a reasonable lower price than competitors. Pass certain costs to our consumers
whenever possible (free shipping).
Private Label

Our main geographic region was North America; we did not enter Latin America until Year 15.
Since our primary focus was the branded footwear we did not have a strategy to obtain market
share in the private label segments thus our market share was lower compared to our competitors
until the later years.
Production Strategy and Workforce Compensation

Our main goals of our production strategy were to upgrade facility capacity, reduce reject rate,
and decrease operation costs. We concentrated most of our production in the most cost effective
regions North America and Asia-Pacific and Latin America. By focusing our capacity in the
appropriate regions we were able to meet expected demand. A part of our strategy was to
upgrade facilities and resources as often as finances allow, unfortunately we only upgraded one
plant at Option A, when we should have upgraded all plants early on to reap the benefits of cost
savings later on. We also used the lowest amount of superior materials possible without
sacrificing our SQ rating. We maintained a balance between workers incentive pay and base
wage changes with that of the industry average. Additionally, we pursued six sigma and best
practices only to increase productivity without sacrificing our profit margin. However, had we
spent more on these practices early on the benefits of cost savings would have occurred in the
later years.

Pairs Produced
Year 11 Year 12 Year 13 Year 14 Year 15* Year 16 Year 17 Year 18 Year 19
1871
2288
2342
2937
2937
2937
2937
4106
4106
NA
EA
3145
4420
4608
4622
4622
4617
4617
4608
4608
AP
2046
2046
2046
2036
2036
LA
Number of Workers Employed
Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19
488
495
492
606
601
596
596
597
840
NA
EA
1342
1619
1604
1648
1648
1652
1678
1764
1764
AP
697
675
681
675
664
LA
Productivity

NA

AP

LA

Year 11

3.83

2.34

Year 12

4.62

2.73

Year 13

4.76

2.87

Year 14

4.85

2.80

Year 15

4.89

2.80

2.94

Year 16

4.93

2.79

3.03

Year 17

4.93

2.75

3.00

Year 18

6.88

2.61

3.02

Year 19

4.89

2.61

3.07

Productivity
8.00
7.00

6.88

6.00
5.00

4.62 4.76 4.85 4.89 4.93 4.93

4.00

4.89
North America

3.83

3.00
2.34

2.00

3.07
2.80 3.03
2.79 3.00
2.75 3.02
2.73 2.87 2.80 2.94
2.61 2.61

Latin America

1.00
0.00
1

Asia-Pacific

5
Years

Finance Strategy
PumKash wanted to keep outside financing minimal, thus we raised a lot of money and any
additional capacity that was purchased was through use of our own funds. Our strategy was to
increase profitability, increase net revenues, and maximize stock prices.
Year Cash on Hand ($000s)
11
19,244
12
33,803
13
59,364
14
30,369
15
96,457
16
173,414
17
224,063
18
314,484

PumKash maintained a positive cash flow and was able to

increase financial position every year except the Year of 14,
the cash flow decrease because of the purchase of new
capacity in Latin America.

We overlooked a dividend strategy causing us to miss out on

financial opportunities. . However, if we were to issue
dividends we would have issued them starting at $1.00
beginning in year 13 and increase the payout by $1.00 every
year as dividends help to increase image and return on equity.
We maintained an A+ credit rating by maintain healthy debt-to-asset ratio, interest coverage
ratio, and default risk ratio.
We always applied a pricing strategy below the average of industry price in order to capture
market share. We consistently maintained a price of at most 10% below industry average in
internet and wholesale segments.

We found the market

shares in Private
Label Segment were
not reasonable
achieved in the first
few years, therefore
we immediately
shifted our key focus to internet and wholesale segments then turned our attention back to the
private label segment in later years.
We initially believed that investing into advertising would boost our sales volume in the early
years we maintained expenses of at least 15% above industry average. Later, we did not make
any changes nor did we allocate more funds to our advertising budget and we fell below industry
average which correlated with our reduced amount of market share.

Financials
Ratios
Gross
Margin
(%)
Oper.
Mar.
(%)
ROA
(%)
ROE
(%)
Current
Ratio
Debt to
Asset
Total
Asset
Turnover

Year 11
G
Ind.

Year 12
G
Ind.

Year 13
G
Ind.

Year 14
G
Ind.

Year 15
G
Ind.

Year 16
G
Ind.

Year 17
G
Ind.

Year 18
G
Ind.

40

46

46

49

47

49

48

50

44

45

47

49

46

46

44

47

15.2

22.1

25.4

26.8

26.6

26.5

27.7

28.4

25.6

25

27.3

27.3

25.1

24.8

23.6

25.2

7.4

11.5

16.7

15.7

16.5

15.5

16.6

16.3

15.9

14.1

16.2

15.6

12.8

14.4

16.9

14.2

12.4

19.3

26.1

23.7

23

20.8

21.3

20.6

19.5

16.4

18.6

18

14.3

15.7

2.89

3.09

3.52

4.24

4.44

5.34

4.24

5.53

6.04

7.45

12.06

8.76

14.4
6

12.1
9

14.4
0
16.7
6

0.31

0.30

0.22

0.21

0.15

0.15

0.09

0.11

0.05

0.05

0.02

0.89

0.88

1.05

0.93

0.97

0.9

0.91

0.85

0.93

0.83

0.87

0.83

0.72

0.83

0.75

0.79

Debt to
Equity
Ratio*

Year 11

Year 12

Year 13

Year 14

Year 15

Year 16

Year 17

Year 18

0.55

0.38

0.24

0.15

0.11

0.04

0.04

0.04

15.7
14.6
4

Competition
North America
Private Label
Year

11

12

13

14

15

16

17

18

Competition

Mkt.Sh.

Price

Wholesale
Mkt.Sh.

Internet

Price

Mkt.Sh.

Price

PumKash

24.50%

43.00

14%

50.00

21.40%

65.00

Ballerz

17.40%

33.00

14.90%

46.00

13.90%

70.00

D C Shoes

0%

70.00

15.90%

62.00

15.90%

79.00

PumKash

8.70%

35.00

17.90%

50.00

24.80%

65.00

20%

35.00

16.10%

53.00

12.90%

70.00

D C Shoes

17.40%

45.00

13.40%

62.00

14.80%

73.00

PumKash

8.20%

35.00

21.40%

50.00

21%

65.00

Ballerz

21.40%

36.00

15.50%

56.00

12.10%

75.00

D C Shoes

0.00%

45.00

9%

62.00

11.50%

72.00

PumKash

10.20%

35.00

20.30%

50.00

23%

65.00

Ballerz

17.20%

36.00

13.90%

58.00

11.60%

77.00

D C Shoes

51.10%

32.00

7%

58.00

9.50%

68.00

PumKash

26%

35.00

20.20%

50.00

22.50%

65.00

Ballerz

17.50%

36.00

12.10%

59.00

9.50%

80.00

D C Shoes

15.20%

35.00

9.30%

58.00

7.70%

72.00

PumKash

23.40%

35.00

20.70%

50.00

24.30%

65.00

Ballerz

18.30%

34.99

10.40%

59.00

6.90%

83.00

D C Shoes

18.20%

35.00

11.90%

58.00

13%

72.00

PumKash

17.50%

35.00

17.80%

50.00

20.20%

66.00

Ballerz

22.60%

34.99

12.50%

57.50

9.20%

80.00

D C Shoes

0%

35.20

15.10%

58.00

18.10%

72.00

PumKash

34.50%

34.00

19.60%

50.00

19.70%

68.00

Ballerz

21.10%

33.99

12.20%

57.50

9%

80.00

D C Shoes

20.80%

31.99

16.30%

56.00

22.80%

67.00

Ballerz

Our main competitors were Ballerz and D C Shoes. Initially, we did not play the game to
compete with other industry members and did not pay much attention to them until later in the
game which was a mistake on our end.

Year
11
12
13
14
15
16
17
18

$
$
$
$
$
$
$
$

EPS
2.00
5.16
5.80
6.70
7.54
8.71
7.89
9.16

PumKash
ROE
12.40%
26.10%
23%
21.30%
19.50%
18.60%
14.30%
14.40%

Stock$
$ 19.18
$ 91.50
$ 104.54
$ 124.14
$ 117.08
$ 131.03
$ 99.25
$ 117.09

$
$
$
$
$
$
$
$

Performance Targets
Ballerz
EPS
ROE
Stock$
2.60 15.80% $ 26.97
6.72 32.60% $ 129.69
8.17 30.20% $ 171.88
8.38 24.40% $ 180.98
8.29 19.90% $ 129.34
8.88
18% $ 118.49
11.49 19.70% $ 184.20
12.32 18.50% $ 191.06

$
$
$
$
$
$
$
$

EPS
3.60
6.10
5.91
5.69
5.44
8.21
8.37
10.83

D C Shoes
ROE
21.20%
27.90%
21.60%
17.70%
14.90%
19.40%
16.90%
18.90%

Stock$
$ 52.70
$ 113.54
$ 113.19
$ 91.25
$ 71.57
$ 135.80
$ 134.74
$ 178.94

Discus differences in performance targets and ratios and what they mean
GPumKash
Ratio
Gross Margin
Operating
Margin/ROS
ROA

Year 11
40%

Year 12
46%

Year 13
47%

Year 14
48%

Year 15
44%

Year 16
47%

Year 17
46%

Year 18
44%

15.2%

25.4%

26.6%

27.7%

25.6%

27.3%

25.1%

23.6%

7.40%

16.7%

16.5%

16.6%

15.9%

16.2%

12.8%

16.9%

ROE
Current Ratio
Debt to Asset Ratio
Debt to Equity Ratio*
Total Asset Turnover

12.40%
2.89
0.31
0.55
0.89

26.10%
3.52
0.22
0.38
1.05

23%
4.44
0.15
0.24
0.97

21.30%
4.24
0.09
0.15
0.91

19.50%
6.04
0.05
0.11
0.93

18.60%
12.06
0
0.04
0.87

14.30%
14.46
0
0.04
0.72

14.40%
16.76
0
0.04
0.75

Year 15
49%

Year 16
52%

Year 17
49%

Year 18
49%

Ratio
Gross Margin
Operating
Margin/ROS
ROA
ROE
Current Ratio
Debt to Asset Ratio
Total Asset
Turnover

Ballerz
Year 13 Year 14
52%
51%

Year 11
45%

Year 12
52%

18.0%

32.0%

33.0%

32.0%

29.0%

31.0%

30.0%

30.0%

9.4%
15.8%
3.12
0.20

21.2%
32.6%
3.9
0.21

21.7%
30.2%
5.71
0.14

19.3%
24.4%
5.92
0.08

16.7%
19.9%
6.52
0.05

15.7%
18%
7.76
0.02

17.8%
19.7%
12.99
0

12.9%
18.5%
13.49
0

0.89

1.00

0.98

0.87

0.81

0.71

0.84

0.79

Ratio
Gross Margin
Operating Margin/ROS
ROA
ROE
Current Ratio
Debt to Asset Ratio
Total Asset Turnover

Year 11
46%
22.0%
12.0%
21.2%
2.23
0.33
0.9

Year
12
51%
29.0%
18.6%
27.9%
5.06
0.2
1.01

Year
13
51%
28.1%
16.4%
21.6%
6.86
0.14
0.88

Year
14
48%
30.0%
14.6%
17.7%
9.79
0.09
0.72

Year
15
44%
26.9%
13.5%
14.9%
10.08
0
0.73

Year
16
48%
26.1%
17.0%
19%
8.34
0
0.93

Year
17
46%
24.1%
15.1%
16.9%
8.83
0
0.89

Year 18
50%
27.8%
17.7%
18.9%
9.89
0
0.9

Private Label Market Share

60
50
40
34.5
% 30

26

24.5
20

Ballerz

23.4

D C Shoes

17.5

10

8.7

8.2

10.2

12

13

14

PumKash

0
11

15

16

17

18

Wholesale Market Share

25
21.4

20

20.3

20.2

20.7

17.9
15
%

17.8

19.6

14

PumKash

10

Ballerz
D C Shoes

5
0
11

12

13

14

15

Years

16

17

18

Internet Market Share

30
25
20

24.8
21.4

21

23

22.5

24.3
20.2

19.7
PumKash

% 15

Ballerz

10

D C Shoes

5
0
11

12

13

14

15

Years

Lessons Learned

16

17

18