1. BSG Company B Industry 42 Presented by: Sebastian Corredor
Senior, Business Administration- Finance, December 2010
Johnathan Lee
Senior, Business Administration- Finance and Supply Chain Management, May 2011
James Ball
Senior, Accounting- Managerial Accounting, May 2011

2. 5 Forces Analysis, Industry 42
COMPETITIVE FORCES
LEVEL OF COMPETITION
Years 11-14
1) SUPPLIERS
HIGH: 52.8% superior materials usage thus prices increased 5.6% over the price base.
2) BUYERS
HIGH: 7 different sellers
Most sales and revenues from wholesale segment
Switching costs are low
3) SUBSTITUTES
LOW: No evidence customers will switch to other products on other industries.
4) RIVALRY
MODERATE: only one competitor roughly equal in size (Co. A)
Industry has high rate of sales growth
Most sales from Wholesale segment
Even at full overtime production, capacity is shy to meet future demand
5) THREAT OF ENTRY
LOW: No evidence that new companies will enter market.
-Industry 42 distributed among companies A, B, C, D, E, F and G

3. 5 Forces, New Entry, Industry 42
Summary:
Suppliers: HIGH
Buyers: HIGH
Substitutes: LOW
Rivalry: MODERATE
Threat of Entry: LOW
Because there are a total of TWO low forces, expected profitability of a new entrant would be ABOUT EQUAL to average cost of capital.

4. BSG Strategic Group Map
This strategic position represents the North America region in year 16.

5. Key Success Factors From Footwear Industry: From BSG:
Effective Quality Control
Economies of Scale
Establishment of Brand Names
From BSG:
S/Q Rating
Operational Efficiency
Celebrity Appeal
Between the athletic footwear industry and BSG, effective quality control and S/Q rating are similar. Effective quality control benefits the S/Q rating in the simulation.
In addition, Operational Efficiency from BSG can be obtained by acquiring economies of scale as management reduces cost per unit by increasing capacity.
Furthermore, Establishment of Brand Names from the footwear industry and Advertising from BSG have similar connections. A major component of brand name recognition arises from celebrity appeal.

6. Strength Assessment Table
The strength assessment is based on the three BSG key success factors, taken from the North America wholesale segment in year 16 :
Strength Assessment Table
Key Success Factor
Company Score
Industry Average
Strength Assessment
Score
S/Q Rating 6 5 4
Operational
Efficiency*
0.533
0.555
Celebrity Appeal
315 97
S/Q Rating
Operational Efficiency
Celebrity Appeal
Based on the strength assessment score, management is performing at or above average in all three BSG key success factors.
* Operational efficiency= Cost of Pairs Sold/Net revenues year 16

7. Market Share Growth Trend
North America
Europe/Africa
Asia/Pacific
Latin America
Year 11
15.90%
16.30%
17.70%
14.50%
Year 12
16.00%
15.20%
17.50%
14.70%
Year 13
14.90%
17.30%
Year 14
13.60%
15.60%
Year 15
12.30%
14.40%
13.30%
Year 16
10.60%
10.30%
9.90%
9.40%
Data only represents market share for wholesale segment.
Analysis shows market share is decreasing on all geographic regions. Management should determine the causes for this decline in order to regain lost market share and build a sustainable competitive advantage in all four geographic regions.

8. Wholesale Segment Market Share

9. Financial Performance Trend
EPS
ROE
Net Profit*
year 11
3.28
19.50%
12.60%
year 12
6.18
27.80%
18.30%
year 13
4.42
16.50%
13.00%
year 14
5.68
19.60%
15.90%
year 15
2.82
8.00%
7.60%
year 16
8.33
19.80%
17.80%
*Net Profit as a percent on net revenues.
ROE, EPS, and Net Profit were exceptional on year 12. Company B experienced a decline in years 13 and 15 but was able to increase them in year 14 and 16. As shareholders we would like to see these numbers return to their year 12 levels. Management should determine the causes of the decline in years 13 and 15 to prevent future fluctuation.

10. Earnings per share (EPS)
ROE and Net Profit
Earnings per share (EPS)

11. Recommendation
To create and sustain competitive advantage in relationship with customers we recommend the following:
We are pleased to see management has increased their celebrity endorsements and are operationally efficient, but they should keep an eye on the relationship between quality and price because it is not in line with their competitors. Thus the S/Q rating should increase or prices should decrease.
To create and sustain competitive advantage in relationship with shareholders we recommend the following:
Management should continue giving out dividends and repurchase stocks in order to increase their earnings per share and stock price.

12. References
"Global Footwear Manufacturing: C1321-GL." IBIS World Industry Report. 24. NCSU Libraries. Web. 14 Oct < x?indid=500>.