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De-Lite Shoe Company
Our mission and values are to helppeople throughout the world realize thefull potential of their body and sole.
Our vision is to put a pair of De-Liteson every foot worldwide!
-Groove is in the Heartand on your feet
Joe Smith, Co-Founder and CEO
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A Rich Tradition Of:
Rewarding Share Holders Handsomely.
(Returned $378 Millionsto shareholders in dividends and stockrepurchases in years 11-20.)
Selling Footwear Customers Demand and Like.(Sold 10.3 Millions ofS/Q 7 shoes worldwide in year 20.).
Management:
CEO: Joe
Smit
CFO: Joe Doe
COO: M.
Ditt
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New Management Goals: Year 11
Grow earnings per share at least 10% annually.
Maintain a return on equity investment (ROE) of15% ormore annually.
Maintain a B+ or higher credit rating.
Achieve stock price gains averaging about 10% annually.
Achieve an image rating of70or higher.
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How did we do?Grew earnings per share at least 10% annually.
Maintained a return on equity investment (ROE) of15% ormore annually.
-10
0
10
20
10 11 12 13 14 15 16 17 18 19 20
EPS (17.7% Annual Growth)
-20%
-10%
0%
10%
20%
30%
40%
1 2 3 4 5 6 7 8 9 10 11
ROE (Average 19%; 3.86% Annual Growth)
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How did we do?
Maintained a B+ or higher credit rating.
Achieved stock price gains averaging more than 10% annually.
0
50
100
150
10 11 12 13 14 15 16 17 18 19 20
Adjusted Credit Rating (AverageA-)
0
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100
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300350
400
1 2 3 4 5 6 7 8 9 10 11
Stock Price (23% Growth; Average $126.45)
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How did we do?Achieved an image rating of70 or higher.
60
70
80
90
10 11 12 13 14 15 16 17 18 19 20
Image (Average 79.8)
EPS 30%
ROE 20%
Credit Rating 15%
Stock Price 20%
Image Rating 15%
Why were these Goals Important?
Scoring Criteria:
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De-Lite Shoe Company: The Best of Best!
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Our JourneyStart: Year 10 Year 10 revenues of$238 million, net profit of$25 million
(equal to $2.50 per share), an ROE of~17%, a solid B+credit rating, and market capitalization of$300 Million
End: Year 10 Year 20 revenues of$539 million, net profit of$97 million
(equal to $12.78 per share), an ROE of~22%, a solidA+credit rating, and market capitalization of$1.8 Billion
In 10 Years:
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How Did We Do Compared to Our Esteemed Competitors
-$100
$0
$100
$200
$300
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Net Sales Cost of PairSold
WarehouseExpenses
MarketingExpenses
AdminExpenses
OperatingProfit
InterestExpenses
IncomeTaxes
Net Profit TotalDividends
$$s
Millions
Break up of Shoe IndustrySales, Profits, Expenses and Dividends
A B C D F
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How Did We Do Compared to Our Esteemed Competitors
0.00%
10.00%
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30.00%
40.00%
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60.00%
COGS Warehouse Marketing Admin Gross Profit Income Tax Net Profit TotalDividend
P
ercentages%
Shoe Industry Cash Allocation (Year 19)
A B C D F
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How Did We Do Compared to Our Esteemed Competitors
0.00%
10.00%
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30.00%
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70.00%
COGS Warehouse Marketing Admin Gross Profit Income Tax Net Profit Total Dividend
Percentages%
Shoe Industry Cash Allocation (Year 20)
A B C D F
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Strategies We UsedBroad Differentiation.
Branded Footwear Emphasis.
Focused on all Geographic Regions.
Zero Focus on Private-Label Footwear (Sweet Poison).
Same Strategy worldwide.
Optimum Marketing.
Clever Use Retailer Support and Celebrity Endorsements.
d
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Strategies We UsedEconomies of Scale.
Production in Low Cost Countries.
Worker Incentives and High Productivity.
Demand matching Incremental Capacity Growth.
Captured Wholesale first; Internet later.
Optimal Warehouse Operations
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Porters 5 Forces
New Entrants Weak Not allowed ingame mode
Substitutes Weak, We all could use a
pair of shoes Customers Strong, Brand Loyalty
Suppliers Weak, not a component of
the game mode Rivals Strong, rivals would imitate
strategies to gain market share
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Driving Forces
Exchange Rate Fluctuation
Stock Market Fluctuation
Trade barriers
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Celebrity Endorsements
Signup as Many Celebrities as We can
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Strategic Group Map
Year 12 Year 19
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Plant Operations
Built new plant in LA region in year 11
Sold NA plant in Year 12
Added Capacity every year (9,100 M)
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Plant Operations
Plant Upgrades
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Plant Operations
Employee Wages
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Plant Operations
Six Sigma and Best Practices Training
St t E ti
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Strategy Execution:
St t E ti
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Strategy Execution:
Strateg E ecution
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Strategy Execution:
Strategy Execution:
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Strategy Execution:Price changes in response to changing market conditions.
Internet slowly becoming more important.
0%
200%
10 11 12 13 14 15 16 17 18 19 20
Internet vs Wholesale
Internet Wholesale
Our Profits Make up In a Nut Shell
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Our Profits Make-up In a Nut-Shell
-$100
$0
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$$sMillion
s
Revenues & Net Profit Vs Number of Shoes
Net Sales Net Profit No of Shoes (00)
Th S
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The Secret
In Dollars
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In Dollars
I D ll P Sh
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In Dollars: Per Shoe
In Dollars: Per Shoe
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In Dollars: Per Shoe
-$10.00
$0.00
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$20.00
$30.00
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$60.00
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Total Dividend Net Profit Income Taxes Interest Expenses
Admin Expenses Marketing Expenses Warehouse Expenses Cost of Pair Sold
Our Strength Marketing in all Regions
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Helped us to mitigate foreign currency exchange rate variance.
In Earlier years EA was important. Later years LA region.
NA becoming increasingly important.
Our Strength Marketing in all Regions
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Millions
Net Earnings (EBIT) By Region
LA-Total AP-Total EA-Total NA -Total
-150%
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150%
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Percentages%
Regional Profits by Percentages
LA-Total AP-Total EA-Total NA -Total
Our Strength Free Cash Flows
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Our Strength Free Cash Flows
-$50
$0
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$$sMillions
Free Cash Flow
$27,750
U t ll bl F t F i E h R t
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Year 20 Earnings reduced by $47 Millions.
Uncontrollable Factor: Foreign Exchange Rates
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$$sinMillions
Foreign Exchange Impact
Overall Adjustment Total
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$$sinMillions
Foreign Exchange Rate Impact by Region
LA AP EA Year
What Won Our Customers Hearts
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What Won Our Customers HeartsPrice
Number of models/styles
Styling/quality (S/Q) rating
Advertising
Size of retailer network
Celebrity endorsements
Delivery time
Retailer supportMail-in rebates
Shipping charges (Internet sales only)
D Lit Sh C Hi h t A l d
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De-Lite Shoe Company: Highest Accolade
Bright Future Ahead
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Bright Future Ahead
Keys to Our Success
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Keys to Our SuccessWe Understood company operations.
We Learned well how to run the game.
We Developed a specific strategy & stuck with it.
We Analyzed competitors and industry trends.
We Maintained balance between demand and supply.
We were assertive & proactive.