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BSG Presentation: ZipZen
Transcript of BSG Presentation: ZipZen
Founder 2 new prezis every second! TED Conferences invested in Prezi because of their shared mission: helping people share great ideas. In 2011, Prezi raised a Series B financing led by Accel Partners. Unparalleled product innovation millions of reusable prezis. redesigned user-interface, 3D capabilities, ZipZen a production ZipZen ZipZen- Shop by Brand! I wonder what ZipZen's financial data looked like while Zain, Kelly and Nad were managing the company... Contents Introduction
Brief financial review
'An Intriguing strategy'
Actions to out-compete rivals
Competitive Strategies in;
Private Label Market
Steps we took
Conclusion Introduction ZipZen is committed to being the market leader and innovator in the global footwear industry. It is our goal to ensure our satisfied customers to continue their shopping experience in a safe, fashionable and reliable manner. Note: We expect ZipZen to grow continuously in the coming years Strategies are means to ends, and these ends concern the purpose and objectives of the organization. They are the things that businesses do, the paths they follow, and the decisions they take in order to reach certain points and levels of success. Learning (continued) Dynamic Competition "One advantage when you're No. 1 or 2 in an industry is that you can really have a lot to say in what the future's going to be like by what you do. I'm not a believer in always forecasting the future. But if you take actions that can create the future, at least shape it, then you can benefit from it.
They say: 'Do you sleep well at night with all the competition?' I say: 'I sleep like a baby'. They say: 'That's wonderful.' I say: No, no. I wake up every two hours and cry!' because it's true, you know. You have to feel that restlessness."
late Chief Executive,
Coca-Cola Corporation Causes generate effects. Actions lead to outcomes.
This was seen over and over again in BSG-online. We had seen many occasions where an action by one competitor affected the relative success of the rivals and which provoked responses. One action lead to several reactions by the rival companies in the industry. Each of these reactions in turn affected the rival competitors in the industry. New responses followed.
This lead to the 'competitive chaos' as seen in Industry 1 for BSG-online. The figure above shows a competitive business environment which is permanently fluid and unpredictable. We feel that this is the best example of our situation in BSG. For example, each company was producing at lower costs each year. ZipZen had to adapt and respond to defend our place in the market. Production Strategy Plant Capacity Capacity; Years 11-16 Capacity; Years 11-14 New Capacity Purchased in Year 14
(0.5 million units) New Capacity purchased in Year 15
(1 million units) Total Capacity at end of year 16: (7.5 million units) ZipZen produced its footwear in 2 Geographic regions throughout the game.
We had a capacity of 2 million units in North America and 4 million units in Asia-Pacific.
We started our expansion process in year 14, after researching the market.
Market research showed that there was an excess supply of 58.2% in year 11, 95.4% in year 12 and 52.6% in year13.
Supply and demand were balanced in year 14, the year we started our expansion. ZipZen Global Sales Units for Private Label Was not a major part of our sales strategy but it was carefully utilized to take advantage of excess capacity allowing ZipZen shoes to spread overhead costs, maintain a low cost structure and to increase the image rating.
Originally, we wanted to pursue a low cost, medium quality strategy in all geographic regions
However, the industry became fiercely competitive right from the start. We were involved in an industry wide price-war.
Exited the private label market when we found we could no longer compete with falling shoe prices. Our workforce compensation was higher than the industry average in year 11.
In the following years, we reduced the compensation levels in order to reduce the cost of production.
It reduced the productivity of the workers though.
However, we felt that it was a compromise between cost and productivity. Our plan was to purposefully execute a bad fiscal year, then buy back the shares when the stock price has sunk. This would allow our company to gain huge amounts of capital using a “build and sink” strategy for our company on a manipulated stock price. This is terribly risky and rather unethical, but we thought it was innovative and that it would catch most companies off guard.
We did not anticipate that our company would do so bad the first year. Hence we had to put a halt to this strategy until we were financially more stable (in year 15). To craft and execute a strategy for an athletic footwear company that, when pitted against the strategies of rival companies, delivers good bottom-line results and builds shareholder value.
Biggest challenge was how to keep production costs low enough to off-set socially conscious activities/celebrity endorsements. Future Actions Continue to further upgrade plants
Build more capacity in Asia plants based on forecasts in global demand
Return to our dominance in regard to being socially responsible (Gold Star Awards in years 14 and 15)
Continue to aggressively pursue possible celebrity endorsements If we can replay the game... Mostly we will do the same
Upgrade SQ rating
Be more flexible and take more risks
Invest more to plant capacity
Buy more stock at the beginning of the game
Be more effective in Private Label market Learning (general) Running the athletic footwear company in head-on competition with rivals gave us a chance to put into play the very kinds of things that we are reading in the text about crafting and executing strategy in a globally competitive market place.
We drew together the information and lessons of prior courses, consolidated knowledge about the different aspects of running a company
Competing year to year required constant adjustment to our plans (emergent strategies) Our understanding of revenue-cost-profit relationships is deeper now.
We have more confidence in utilizing the information contained in company financial statements and operating reports. Internet Market Wholesale market Competitive Strategy Competitive Strategy Wholesale segment market share by different geographic regions Steps we took Year 11 what we did.. why we did it lessons learned Low model numbers to reduce the cost of production a low model number combined with a medium S/Q rating is not going to win us market share. We will use Porter's model of generic strategies to explain the strategy we used for the wholesale segment... The retail price for the wholesale market is almost the same throughout all the geographic regions. Learning (continued...) Utilize resources – research, the player’s guide
Know what attracts your buyers
A low price may not be convincing enough
Don’t rely solely on the next year projected performance Relied solely on the projected performance for next year we thought the projections were meant to be accurate Actions to out-compete rivals Monitored inventory levels
Focused on models we are offered
Continued with best practice methods that align with our strategies
Monitored close competitors Focused heavily on CSR to improve our image rating CSR drives up the cost of production disproportionately higher we were unaware that the forecasts do not take into consideration, the rival companies' strategies. Year 12 what we did.. why we did it lessons learned Increased model availability to gain more market share higher models do indeed increase market share Sold stocks worth ($24.3 million) to gain capital without applying for bank loans stock price falls down dramatically Paid dividends (40% dividend payout) to increase our EPS not very important since it reduced our profit and ending cash Year 13 what we did.. why we did it lessons learned further increased model availability to gain more market share higher models do indeed increase market share Year 14 Differentiation strategy implemented market analysis showed that the winning company was using this strategy profit margins were quite low because of high costs Purchased plant capacity to meet the growing demand reduces the overhead cost and hence the cost per pair Year 15 Purchased more capacity demand was continuously increasing we gained economies of scale Year 16 Repurchased stocks to increase EPS increases the stock price Year 15 Year 16 to increase the EPS Our biggest strength in the internet market was the low price.
We had the second lowest prices in the industry for all the geographic regions. This was achieved due to our low cost of production. (the highlights...) Finance Strategy Use minimal external financing
-Never acquired unnecessary debt
-Maintained solid credit rating
Repurchases stocks in order to increase Stock Price, ROE & EPS
Keep retained earnings in the company to finance investments for improvements or upgrades Closest Competitors Internet segment Wholesale segment Private Label An Intriguing Strategy Conclusion Just as we are trying to win business away from YOU, our rival companies, some are certain to be actively striving to take sales away from our company.
It is the competitive power of Zipzen and rivals’ strategies that is the deciding factor in determining sales and market shares.
BSG is all about practicing and experiencing what it takes to develop winning strategies in a globally competitive marketplace
Never underestimate your opponent! This presentation looks at how our company, ZipZen, performed in the Business Strategy Game simulation. We will look into some of the strategies we used, some of the decisions we made and what we learned from them. We will also discuss the general things we learned as a result of the game.
Now, sit back, relax, and enjoy our presentation... hope you didn't get too old playing the strategy game... THANK YOU... Competitive strategy SQ rating: less use of superior materials, continuous improvement, training and pay incentives
Strong Retail Partnership
Major investment in sales support and short deliver times
Low Cost Structure
-Keep labor costs low by manufacturing in Asia Pacific and North America
keep warehousing cost low ZipZen We can produce our shoes at lower costs than the industry average.
We also produce a wide range of models.
This means that we are in the cost leadership sector, leaning more towards differentiation.
We differentiate our product by offering more retailer support, utilizing more retail outlets and having shorter delivery times. = 1 million capacity