This report is all about B Urban Footwear (BUF) company. This report contains all strategic decisions including mission statement and vision statement. The business strategy is, generally, based on micro and macroeconomic factors for the growth of the business.
The focus of BUF is to provide athletic footwear to professional athletes, where they get the company’s stuffs at an affordable price. The aim of the BUF is that everyone can feel comfortableness while using the company’s products. In addition to that, the company had a successful year-10, in good financial position with other athletic companies. However, the leading aim and goal is to be one of the leaders of sales of athletic shoes in Europe. We will increase the production, the marketing strategy and techniques in the next 3 to 6 months to increase in European sales, and the company’s profit with a range bound of 7% to 10%. The mission statement also covers the marketing strategies, and increase the digital marketing by means of social media, such as, Facebook, YouTube, Instagram, etc. Lastly, developing logistics system, increasing the manufacturing capacity and increasing the sales turnover especially in Asia region may eventually increase the market share of your company.
We do quality, comfortable and affordable shoes. Also, we do personalized shoes for customers who wish to have an own design and unique shoes. Plus, we do shoes for people who have a medical condition (flat foot, wide, slim fit, etc.). Our vision is also to be the leading company in the footwear industry for its soft quality of causal shoes which can be used for mountain biking, walking and hiking. BUF tries to make unique shoes which are differentiated from other footwear companies by means of uniqueness, soft materials and long-lasting life and light weight. Your company has the vision to increase its market share not on the local level but an international level as well. BUF is very optimistic for its future growth and expansion that will enhance its profitability in the foreseeable future.
BUF works with integrity and provides quality footwear stuff for all common people as your company believes in respect for customers and employees as a valuable asset and makes the commitment for equality. BUF has an object for sustainability in the footwear industry through innovation and upgrading the products and value diversity. Our core value is just service excellence to the customers and maintains the trust from the customers’ side. Since, your company produces the products which is environmentally friendly and knows very well about the Corporate Social Responsibility (CSR) and ethical consideration.
BUF has an aim is to offer to its customers an individualized unique design, and has the target to grow its business to Europe and Latin America. BUF has the target to become the number one athletic footwear brand in Europe, United Kingdom (UK) and United States of America (USA). Your company is trying to make more designs for women and kids through Sustainable, Measurable, Attainable, Relevant and Time-Bound (SMART) strategy and to release a special line for young people and teenagers. BUF has to improve its Key Performance Indicators (KPIs) especially for financial ratios including Earning Per Share (EPS), Returns on Equity (ROE) and stock price of your company by the end of Year-15 and Year-16 respectively. BUF has a positive stand for increasing EPS to $3.67 in Year-15 and $3.47 in Year-16 by the end of its financial year.
Strategic decisions have been taken place by BUF in year-6, since, it is assumed that year-6 is a year-15 information, where the company has taken major decisions in order to get its target line. Besides, there are 10 companies operating in Business Strategy Game (BSG) for which they represent the footwear industry, and BUF is also one of them. Footwear Industry Report (FIR) is shown as a part simulation process in table # 02
Financial statements are the part and parcel of KPI (Kaganski, Majak, Karjust & Toompalu, 2017; Van Wyk & Wesson, 2021). BUF has an aim to increase its market share throughout the whole world. Since, forecasted data for Year-6 (Year-15) has been presented in table #03.
The corporate strategic objective of BUF is to increase shareholders wealth. BUF has a keen interest to expand its business and increase the payout ratio. However, from the last five years historical data and 6-year, BUF made the dividend payout in Year 10, and after that, the firm has not made the dividend disbursement to its stakeholders as given in appendix # 01.
Decisions are always taken place stated by Brunsson (2019); Spitz, Wagemans, Memmert, Williams, and Helsen (2021), when the goal has been assigned by the organization. BUF has the experience of Rank # 08 as per the FIR criteria. That is why the company has taken the bold actions and decisions to increase its market share especially in athletic footwear and they concern with the celebrities who stand by with the organization.
BUF has considered the Year-14 data as a comparative competitive effort where the company holds its position from the 10 athletic footwear company. The company has an object to make right decisions at the right time. The FIR is a big competitive market and the company tries to develop its market from all over the world. The strategic decisions should be applied in such a way that it increases its turnover rate, market share, customers loyalty, competitive price and sustainability in the footwear industry. Before implementing the decisions, BUF tries to capture every aspect production capacity, logistics and improving the Supply Chain Management (SCM), profitability, equity position and many more things. Table #04 and graph # 01 depicts the idea of last year information, and on the basis of this, the company makes the strategic decisions how the company attains its goal through sustainability and range of athletic footwear products.
Year 14 of BUF has the higher amount of marketing and administrative expenses which erodes the company’s profitability all over the regions. Ptok, Jindal and Reinartz (2018) describe that the organization should flourish only, when it controls its expenditures because expenditure is the factor which reduce the overall success of the business. As the stakeholders are always keen to know the net profit after tax. The company distributes the dividend to shareholders if the company is in a surplus position. Higher dividend payout ratio means that it increases the share price of the company and, indeed, enhance the shareholders wealth in the long-term period. Table # 05 indicates the last year information of its operating expenditures report which are shown as below:
The classification of marketing expenses is broadly categorized into two major segments. Celebrity endorsements of expenditures is not incurred in Year 14 if it incurs then, it decreases the profit of the organization at an alarming rate. Though, the strategic decision for Year 15 made a strategic point for celebrity endorsement as it is necessary for promoting the products in a better way. Apart from this, the major segment of wholesale segments where North America incurs $10,548 in brand adverting. The total spending on brand advertisement by BUF is $41,060 which has curtailed its profitability and growth rate. Similarly, administrative expenses are high enough like corporate overhead in Year 14 touches the level of $10,000 which is a chunk amount. Hence, these are the clear examples of BUF business which requires to make strategic decisions in order to gauge and control its operation costs in the forthcoming year especially Year 15 and Year 16.
Theoretical framework contains several things which are necessary for every organization irrespective of the nature of the business; that includes physical, cultural, global forces, political, legal, social, economic, etc. are being called the business environment (Ajibade, 2017; Huang, Chau, Iqbal & Fatima, 2022; Yin, Song & Zeng, 2022).
These theoretical models are applied to the business environment like as Strength, Weakness, Opportunities and Threats (SWOT) analysis approach. BUF has the strength of athletic footwear products for supplying its products around the world but it does not capture the good market share as it should be. There are several weaknesses are there as not paying dividend for several years so it may weaken its position from the stakeholders’ side. Opportunities turn to visualize your dreams as BUF has made the strategy to enhance its products especially for women’s footwear and young people and teenagers with affordable price. Threats are always there with the business because there are several competitors who also produce the athletic footwears so getting the customers loyalty, again, is a big question for BUF. Credit rating and brand image for the Year 14 has shown the last year information in the BSG.
Credit rating of BUF (as denoted by “B”) has moved from C- to C. So, it is an opportunity of moving towards the positive sign. As, in the Year 15, the company has made a strategic decision to move its rating from C to B- by applying SWOT and Political, Economical, Social, Technological, Environmental, Legal (PESTEL) models.
Macro environment plays a cardinal role for the growth of the business (Barik & Kumar, 2018; Kirikkaleli & Ozun, 2019). If we look at the theoretical model of PESTEL which supports the business strategy and growth of the business particularly for BUF. Table # 07 presents the summary report of FIR at the macro environment level.
BSG provides the data for all ten athletic footwear companies. Since, applying the PESTEL theoretical model, the production takes place Asia pacific, Europe Africa, Latin Africa and North America. The product is geo politically produced in four countries. This thing should embed economically as the imported product has the exchange rate issues. So, producing the footwear products generates the source of economical factors and the athletes and sports lover of shoes fans can easily afford and wear the product at a cheap rate. BUF is socially responsible to provide quality products in every region and does some strategic decisions for using technological change of its production facility as it shown in the table # 07. Since, Year 15, BUF has the space capacity of 12,000 in the four regions. BUF believes in the footwear product is environmentally friendly and it does not harm to the consumer if they wear it for a long time. BUF products are more comfortable by considering the factor of environment. Lastly, legal binding and ethical consideration is the primary motive of BUF.
BUF deals in competitive market in BSG model. Each company is categorized and having different scores rate. The theoretical model is selected for meso-environment of competitive market by selecting Porter’s Five Forces. This can be done and elaborated in table #08 and graph # 02 respectively.
BUF is in the competitive environment where 10 companies are in operational mode and the competition is very high as per the FIR. There is no barrier in the new entrants and they can come in to the market. Styling-Quality (S/Q) rating occurs in FIR where it can show the position of BUF in the scale of 0-10 by BSG criteria. S/Q rating stars of BUF is 6.2* which is a good sign. The power of BUF is to supply all regions of the world of footwear products from Year 10 to Year 14. Furthermore, it is assumed that the customers are independent, and they make their own choices without any influence. However, the potential threats are also lying with the products substitutes as the price increase may reduce the turnover of BUF as it is witnessed from projected Year 15, and the company stands its position at 6.0* because the retail price increases to $89 per unit in Year 15 from $87 in the Year 14. So, it may create the problem of consuming substitutes products by the consumers. Year 15 projected data is shown in the appendix # 03.
Ishengoma and Kappel (2011) define micro environment means that the company attains its goals within the available resources. In this concern, production and workforce have been considered for BUF in all the four regions. Some results have been elaborated in table # 09, where the theoretical model of SWOT analysis is selected. Athletic footwear production in the four regions is the strength of BUF but weaknesses is that if a firm wants to expand the business, it requires investments and capital budgeting. The data of BUF has been selected for the projected Year 15. Enhancement of production capacity is the opportunity for the company where the maximum utilization of resource decreases the average cost of production including variable and fixed costs. The threats may cause in terms of labor turnover rate and the workforce which is engaged in the production of four regions. Workforce productivity in North America has been decreased from 5.067 to 4.883 from Year 14 to Year 15 respectively. High labour turnover rate decreases the specialization rate and jump in training cost for BUF. Thus, the results are shown as below:
Every business, now, needs to rely on emerging technology because it resolves the business issues and identifying the causes of the business for not meeting their targets (Botsman, 2017; Chesbrough, 2003). There are several emerging technologies, such as, Artificial Intelligence (AI), Internet of Things (IOT), Cloud Based Technologies (CBT), Machine Learning (ML), etc. This study takes into account one emerging technology strategy which is AI. Though, simulation process which is done by the machine is processed by the human intelligence. It saves the time of the human being but several consequences have been done while using AI. The company likes BUF applies the AI but they have no idea that if the computer technologies or the server is hacked by the hackers then, how to do disaster recovery plan. The whole data, sometimes, is vanished and the company is not in a position to recover its database. Since, BUF is a large-scale organization and it operates in four regions so it requires data and make strategies for the forthcoming years. However, technology requires a very high initial cost and sometimes the workers of BUF do not have the capabilities to recover lost data. AI requires the highly professional people that will ultimately increase the operating cost of BUF.
Strategic level managers apply the AI in the business of BUF, if they consider that world is evolving in the modern era and it requires the technological change in the computer friendly environment. Technology adoption especially for AI should be considered in terms of cost and benefits analysis approach. Once, senior managers have to adopt AI in the BUF business, they have to do some remedial actions in pro-active basis. For instance, if the data will be lost due to any reason so they must have the backup in order to extract the data within no time delay. AI should be monitored and controlled by Information Technology (IT) professionals, and if any discrepancy arises then, they will take timely action without disturbing the business performance of BUF.
BUF deals in athletic footwear company in BSG simulation model. Since, BUF moves on from rank # 08 to rank # 06 in year 15 (as per the updated information from BSG corporate lobby page). EPS of BUF does not attain the projected figure, i.e., $ 3.67 but actually earns $3.55 per share. Some KPIs ratios are shown in appendix # 04. Overall historical picture of EPS is here as under in graph # 03.
In addition to that, BUF shows its financial cash flow position at the year end, and cash and cash equivalent in Year 15 balance denotes the value of $14,911 (amount in thousand dollars). BUF has gotten good liquidity position and the firm does not any issue of going concern assumption. The firm also generates funds from financing activities and stock share issuance which is having the worth of $851 (amount in thousand dollars). BUF believes in CSR, and it does several charitable works and participate in charitable organization. Lastly, the pension retirement scheme for the employees who get retired from BUF are entitled to receive good compensation from the work. At last, the firm financial report shows that the firm will run its athletic products in the foreseeable future, and have an optimistic approach to maximize the wealth of the shareholders.
Note: Balance Sheet and cash flow statement of Year 15 has been shown in appendix #05 for readers point of view.
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